THE CONTROL
DISTRIBUT
C.H,
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THE CONTROL AND
DISTRIBUTION OF
PRODUCTION
Major C. H, Douglases Works
ECONOMIC DEMOCRACY. By Major C. H.
Douglas. Second and Revised Edition. Crown
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CREDIT POWER AND DEMOCRACY:
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LONDON: CECIL PALMER
Oakley House, Bloomsbury Street, W.C.i
THE CONTROL AND
DISTRIBUTION OF
PRODUCTION
BY
Major C. H. DOUGLAS, M.I., Mech.E.
AUTHOR OF "credit POWER AND DEMOCKACY,"
"economic democracy," KTC.
LONDON
CECIL PALMER
OAKLEY HOUSE, BLOOMSBURY STREET, W.C.I
1922
111
• 7
VI
F I R S,T
EDITION
1922
COPY-
RIGHT
PREFACE
Certain of the chapters in this volume were
first delivered as lectures before the Socio-
logical Society, the Euskin College at Oxford
and the National Guilds League ; whilst the
others appeared in the pages of The New
Age and The English Review, for which full
acknowledgment for permission to reprint
them here is made to their respective Editors.
It
CONTENTS
PAGE
l. The Mechanism of Consumer Control . if
Xlll. A V^OMMENTAKlt wrt .'"•
XIV. "The Moving Finger writes
166
EERATA
On Page 18, the second line from the
bottom, the word " and " should he " any."
On Page 73, line 7 from the top, for the
word " depreciation " read " production."
CONTENTS
CHAPTER PAGB
I. The Mechanism of Consumer Control . 9
II. The Control of Policy in Industry
III. The Control of Production .
IV. A Mechanical View of Economics .
V. Production and Prices
VI. What is Capitalism ? . . .
VII. The Question of Exports
VIII. Unemployment and Waste
IX. A Commentary on World Politics (I)
X. A Commentary on World Politics (II)
XI. A Commentary on World Politics (III)
XII. A Commentary on World Politics (IV)
XIII. A Commentary on World Politics (V)
XIV. " The Moving Finger writes ..."
34
51
56
63
74
82
88
95
109
125
143
153
166
The Control and Distribution
of Production
CHAPTEK I
THE MECHANISM OF CONSUMER CONTROL
No doubt to some members and guests of
this Society much of the subject with which
we are concerned to-night will be elementary,
even if the method of approach to it is some-
what novel ; but to others to whom the subject
of Finance, which is an important component
of it, is a mysterious and incomprehensible
jungle, through which they feel they could
never hope to find a way, I would make the
following suggestions.
Money is only a mechanism by means of
which we deal with things — it has no properties
except those we choose to give to it. A phrase
such as " There is no money in the country
with which to do such and so " means simply
nothing, unless we are also saying " The goods
and services required to do this thing do not
9
THE CONTROL AND
exist and cannot be produced, therefore it
is useless to create the money equivalent of
them." For instance, it is simply childish to
say that a country has no money for social
betterment, or for any other purpose, when it
has the skill, the men and the material and
plant to create that betterment. The banks
or the Treasury can create the money in five
minutes, and are doing it every day, and have
been doing it for centuries.
Secondly, you will hear a good deal to-night
about credit, and I would ask you to bear
most consistently in mind the two following
definitions : —
Real credit is a correct estimate of the rate,
or dynamic capacity, at which a community
can deliver goods and services as demanded.
Financial credit is ostensibly a device by
which this capacity can be drawn upon. It is,
however, actually a measure of the rate at
which an organisation or individual can deliver
money. The money may or may not represent
goods and services.
I would also ask you to realise that the
validity of the criticisms passed on the existing
10
DISTRIBUTION OF PRODUCTION
financial system does not rest to any con-
siderable extent on the personal character, or
the good or bad motives, of financiers. The
motives of both sides of the Irish question,
for example, may be of the most lofty, for all
that I know to the contrary, and no one would
suggest that there are not charming men on
both sides ; but one can hardly say that the
result of their policy is happy, and that either
side can be allowed to pursue a policy having
such results, indefinitely, and the same line
of reasoning can be applied to the existing
financial system.
Before dealing with the subject described by
the title of this address, I would therefore beg
your indulgence for a short space of time in
order to review briefly certain premises funda-
mental to the subject ; because it has been
found that even people very familiar with
these matters are apt to raise vigorous objec-
tions which are really based on other and in-
consistent premises unless they are placed in
the limelight at once, and, as far as possible,
simultaneously. If you disagree with these
premises, you will of course disagree with our
11
THE CONTROL AND
9
conclusions, but if you agree, and still dislike
the conclusions, I hope you will tell us where
the hiatus occurs and suggest another solu-
tion based on them.
Categorically, they are as follows :—
1. Modern co-operative industry (all
modern industry is co-operative) serves two
purposes : it makes goods, and_ distributes
purchasing power by means of which they are
distributed.
2. The primary object of the overwhelming
majority of persons who co-operate in industry
is to get goods with a minimum of discomfort,
both of the right description, " right " being
a matter of individual taste, and in the right
quantity. It is not " employment," and it is
only " money " in so far as money is a means
to these things.
If the system fails to achieve this end, it
fails in its primary object and will break up,
from the failure of the majority to co-operate.
3. If we insist that the distribution of the
goods is entirely (Marxist) or chiefly (Capital-
istic) dependent on the doing of work in con-
nection with the production of them, then it
12
DISTRIBUTION OF PRODUCTION
follows that either (a) it takes all the avail-
able labour to provide the requisite amount
of goods, or (6) an increasing number of
persons cannot get the goods, or (c) goods or
labour must be misapplied or wasted, purely
for the purpose of distributing purchasing
power.
We know that {a) is not true. If it were, the
whole of modern progress would be a mere
mockery. But, on the contrary, it is quite
indisputable that, apart from many other
factors making for real progress, production
is practically proportionate to the dynamic
energy applied to it, and the means developed
during the past century by which solar dynamic
energy (steam, water, oil-power, etc.) has been
made available to the extent of thousands of
times that due to human muscular energy
(which yet, previous to this development, was
able to secure for humanity a standard of life
in many ways more tolerable than that existing
to-day) is sufficient basis for such an assertion.
Speaking as a technical man, I have no hesita-
tion in saying that it is the programme of
production and not the productive process
13
THE CONTROL AND
\^
which is chiefly at fault, and that where the
productive process is working badly it is
because of the inclusion of unnecessary labour
in it.
(b) and (c) are true, as matters of both
common and expert observation.
4. The system under which the whole of
the world, not excluding Russia, carries on
the production and distribution of goods and
services is commonly called the Capitalistic
system, which system, contrary to general
opinion, has nothing, directly, to do with the
relations of employers and employed, which
are administrative relations. The fundamental
premises of the Capitalistic system are, first,
that all costs (purchasing power distributed
to individuals during the productive process)
should be added together, and recovered from
the public, the consumer, in prices ; and,
second, that over and above that the price of
an article is what it will fetch.
If you will give the foregoing premises your
careful consideration, you will see that the
existing economic system is breaking up, not
so much from the attacks on it, which, on the
14
DISTRIBUTION OF PRODUCTION
whole, are neither very intelligent, nor very
well directed, but because of the inherent in-
compatibility of its premises with the objective
of industry and modern scientific progress as
a whole.
The latter, taking the objective of industry
as it finds it, endeavours, and fundamentally
succeeds, in obtaining that objective with an
ever-decreasing amount of human energy, by
shifting the burden of civilisation from the
backs of men on to the backs of machines ;
a process which, if unimpeded, must clearly
result in freeing the human spirit for conquests
at the moment beyond our wildest dreams.
The existing economic system, on the con-
trary, ably backed by the Marxian Socialist,
takes as its motto that saying which I cannot
help thinking proceeded rather from Saul of
Tarsus than from the Apostle of Freedom —
" if a man will not work, neither shall he eat "
— and defining work as something the price of
which can be included in costs and recovered
in price.
It completely denies all recognition to the
social nature of the heritage of civilisation, and
15
THE CONTROL AND
by its refusal of purchasing power, except on
terms, arrogates to a few persons selected by
the system and not by humanity, the right to
disinherit the indubitable heirs, the individuals
who compose society.
May I emphasise this fact before passing on
to more concrete arguments ? — if wages and
salaries, forming a portion of costs, and re-
appearing in prices, are to form the major
portion of the purchasing power of Society,
then modern scientific progress is the deadly
enemy of Society, since it aims at replacing
the persons who now obtain their living in this
way, by machines and processes.
The prevalent assumption that human work
is the foundation of purchasing power has more
implications than it is possible to emphasise Jl
to-night ; it is the root assumption of a world-
philosophy which may yet bring civilisation
to its death-grapple; but one result of it is
that a man and a machine are, in the eyes of
a cost-accountant, identical to the extent that
both are an expense, a cost which must re-
appear in price, the man, however, being at
this disadvantage as compared with a machine,
16
II
DISTRIBUTION OF PRODUCTION
that he has to bear his own maintenance and
depreciation charges. Costs are a dispensation
of purchasing power ; and whether you are
disciples of the " Cost " theory of prices, or of
the " Supply and Demand " theory, you must
admit that Capitalistic prices cannot be less
than cost, over any considerable period of
time.
If, therefore, a portion of the " costs " of
production are allocated to machines, and yet
reappear in ultimate prices, it is obvious that
the costs (purchasing power) in individual
hands are not sufficient to pay these prices.
I do not wish to pursue at great length this
aspect of the subject to-night, because it has
been elaborated in considerable detail in print
and does not lend itself to platform discussion.
But one consideration must be mentioned —
the effect on the prices of ultimate products
— those consumed by individuals — of the
production of intermediate products — tools,
factories, raw materials, etc. While, as has
just been suggested, the flow of purchasing
power to individuals through the media of
wages, salaries, and, it may be added, dividends,
B 17
THE CONTROL AND
0^
is not sufficient to buy the total price-values
created in the same time, it must be remem-
bered that a great and increasing quantity of
the total production of the world is not bought
by individuals at all — it is bought and paid for
by organisations, national or otherwise, and is
of no use to individuals.
Now the costs of this production represent ef-
fective demand to individuals ; and the second
postulate of the present economic system is
,, , . effective demand
that average price = ^r-- — =; r-
° goods m demand.
Consequently, the more of these intermediate
products we produce, under the present system,
the higher rise the prices of goods for individual
consumption ; which is the reason why the cry
for indiscriminate super-production is both
inane and mischievous. You will see at once
that if the above formula for price, under the
so-called law of supply and demand, is correct,
which I suppose is not disputed, then it is really
immaterial whether more or less goods are
made, and more or less money distributed —
and quantity of goods less than sufficient will
absorb all the money available. And because
18
DISTRIBUTION OF PRODUCTION
the Capitalistic incentive to production is
money, production stops when there is no
more money.
You will see that, firstly, the existing
system does not distribute the control of
intermediate production to individuals at all ;
and, secondly, gives them no say whatever as
to the quantity, quality or variety of ultimate
products.
The distribution of purchasing power
through the agency of the present volume of
wages, salaries and dividends thus fails to
distribute the product ; and since when dis-
tribution stops production stops, the system
would appear quite unworkable.
But we know, as a matter of observation,
that, although the grinding and groaning of the
machine is plainly audible evidence that it is
working very badly, it is working, and there
must be something to account for the fact
that distribution of a sort does take place.
There are two things : export credit and loan
credit.
Now I may say at once that I do not see how
it is possible to conceive of an economic system
19
THE CONTROL AND
capable of dealing with the modern productive
system in which this credit factor in the total
sum of purchasing power does not play a pre-
ponderating and increasing part. It is far
better to arrive at conclusions of this sort
inductively rather than deductively, and I
will simply direct your attention to the present
trade position in this country and in America.
There is the plant ; there is the raw material ;
there is labour ; and there is real, though not
effective, demand ; but production is decreas-
ing along a very steep curve.
"Why ? I do not suppose anyone here to-
night is guileless enough to believe that it is
all the fault of Labour. It would do the Labour
extremists all the good in the world, and might
modify their policy, if they could be brought
to realise that Labour, while a necessary factor
in production, is less and less a determining
factor. The success of the various dilution
measures carried through under the stress of
war is quite convincing proof of that fact.
Nor is it Capital, in the ordinary sense of
the word. A man who has sunk large sums
of money in a manufacturing plant wants to
20
I
DISTRIBUTION OF PRODUCTION
manufacture, if lie can, because otherwise his
plant is a dead loss to him.
There is no doubt whatever, and I do not
suppose that anyone at all familiar with the
subject would dispute the statement for a
moment, that the present trade depression ^ is
directly and consciously caused by the con-
certed action of the banks in restricting credit
facilities, and that such credit facilities as are
granted have very little relation to public
need ; that, whatever else might have happened
had this policy not been pursued, there would
have been no trade depression at this time,
any more than there was during the war ;
and that the banks, through their control of
credit facilities, hold the volume of production
at all times in the hollow of their hands. You
will, of course, understand that no personal
accusation is involved in this statement ; the
banks act quite automatically according to
the rules of the game, and if the public is so
foolish as to sanction these rules I do not see
why it should complain.
I should like, however, to emphasise this
1 1921
21
THE CONTROL AND
point : if the civilised world continues to
permit this centralised, irresponsible, anti-
public control of tbe life-blood of production
to continue, and at tbe same time the possibly
well-meaning but ill-informed and dogmatic
Syndicalist makes good what is in essence
exactly the same claim in the administrative
field, then the world, in no considerable time,
will be faced with a tyranny besides which the
crude efforts of the Spanish Inquisition may
well retire into insignificance.
Let me repeat — the only true, sane origin of
production is the real need or desire of the
individual consumer. If we are to continue to
have co-operative production, then that pro-
ductive system must be subject to one con-
dition only — that it delivers the goods where
they are demanded. If any men, or body of
men, by reason of their fortuitous position in
that system, attempt to dictate the terms on
which they will deliver the goods (not, be it
noted, the terms on which they will work),
then that is a tyranny, and the world has
never tolerated a t3rranny for very long.
There is, I think, a widespread idea that
i
DISTRIBUTION OF PRODUCTION
if agitators would only stop agitating, and
reformers stop trying to reform, the world
would settle down. For myself, I am quite
convinced that both agitation and reformism
are merely symptoms of a grave and quite
possibly fatal disease in our social and economic
system, and that unless an adequate remedy
is administered there will be an irreparable
breakdown. I am emphasising this lest any-
one should imagine that mere laissez-faire or,
on the other hand, a vigorous suppression of
symptoms is all that is necessary to cause
things to " come right."
The roots of this disease, then, are as follows :
1. Wages, salaries, and dividends will not
purchase total production. This diffi- il'
culty IS cumulative. '*
2. The only sources of the purchasing power'
necessary to make up the difference are
loan and export credits.
3. All industrial nations are competing for
export credits. The end of that is war.
4. The major distribution of purchasing
power to individuals is through the
media of wages and salaries. The
23
THE CONTROL AND
preponderating factor in production is
improving process and tlie utilisation
of solar energy.
6. This latter tends to displace wages and
salaries and tlie consequent distribu-
tion of tlie product to individuals.
The credit factor in purchasing power
thus increases in importance and
dominates production.
6. This production is consequently of a
1 character demanded by those in con-
trol of credit and is capital production.
7. The fundamental derivation of credit is
j from the community of individuals,
1 and because individuals are ceasing to
' benefit by its use it is breaking down.
If you have followed me so far you will see
that there are two main and increasing defects
in the present system — it makes the wrong
things and so is colossally wasteful, and it
does not satisfactorily distribute what it does
make. The key to both of these is the
control of credit.
I should like to direct your attention to
the meaning which can be attached to the
24
DISTRIBUTION OF PRODUCTION
word ''control." We talk about the "public"
control of this, that or the other. Is there
any person in this room who has ever met the
public, or knows in any clear-cut, tangible
fashion, this alleged entity, the public, or
really — if he or she is honest in the use of
words — cares a broken rush about the public ?
Is it the public which wants better houses,
better food, a wider life ? I think not. When
there is " unemployment " it is John Smith,
Jane Smith and the Little Smiths who experi-
ment with rationing. When there is a war
it is Private, Lieutenant or Colonel Smith who
loses an arm or whose wife places a wreath on
the Cenotaph. I have not noticed that the name
of the Public appears in the casualty lists of
any of the nations engaged in the late war.
I do not suggest for a moment that there is
not a real group-consciousness — I think that
there is such a consciousness. But the ills
from which we are suffering do not take effect
on that plane of consciousness, they take effect
on individuals ; and if, as I have tried to
indicate, the key to the solution of those ills
is to be found in a modified control of credit,
25
THE CONTROL AND
then that modification must be in favour of
individuals. We can, I think, safely leave the
group-consciousness to look after itself.
The problem, then, is to give to individuals
such personal control of credit as will enable
each of them, for himself or herself, to get from
the machine of civilisation those things, now
lacking, to the extent that the machine is
capable of meeting the demand, and the answer
is almost childishly simple — it is contained in
the proposition that he ought to be able to buy
those things with the money at his disposal,
and that if he does not want to buy them, then
he should not be made to pay for them.
If you will consider this matter in the light
of everyday conditions in the world of business,
you will find that the practical steps necessary
to embody these principles in a practical
mechanism resolve themselves into two groups
— the control in the interest of the consumer
of the credit issued to manufacturers, in order
that those things shall be made which the
ultimate consumer wants made — because the
ultimate consumer should be the sole arbiter
of the policy of production, though not con-
26
DISTRIBUTION OF PRODUCTION
cerned with the processes by which his policy
is materialised ; and, secondly, that the credit,
or purchasing power, in the hands of the con-
sumer shall be adequate to enable him, if
necessary, to draw on the maximum resources
of the productive organisation ; otherwise, it
is clear, a part of those resources is ineffective.
As we have previously noticed, individuals
in the modern world obtain their purchasing
power through three sources — wages, salaries
and dividends. This purchasing power is
taken away from them through the medium of
what we call prices, and it will be quite obvious
to you that the first thing necessary is to make
total purchasing power equal to total prices,
a proposition which has no other known
solution than by the addition of a credit issue
to purchasing power. That is to say, we
must give the consumer purchasing power which
does not appear in prices.
Please remember that prices contain not only
production costs, but capital costs, and these
latter are the increasing factor in both costs
and prices. If we take them out of prices
and distribute them as purchasing power, then
27
I \
THE CONTROL AND
prices bear the same relation to costs as does
consumption to production. You will see
that this is so if you remember that capital
charges represent sums based on the credit
value of tools, etc.
But, of course, this results in speedy bank-
ruptcy to the producer who is selling under
cost, unless we go a good deal further.
It must be borne in mind that, though we
find that we require to eliminate these credit-
capita' charges from prices, the credit-capital
is a real if intangible thing, and can be drawn
upon, because tools, processes, solar power,
etc., represent a real capacity to deliver goods
and services. Therefore there must be some-
thing somewhere which stands in the position
of trustee for the collective credit, and should
administer it in the interests of the individuals.
There is such an organ — it is the Treasury.
But the Treasury does not in normal times
deal with manufacturers, it deals with the
banks, and the banks are so-called private
institutions which administer this collective
credit for their own ends, and those ends
are by no means similar to the ends of the
28
i
DISTRIBUTION OF PRODUCTION
community of individuals from whom the
credit takes its rise.
If, therefore, we wish to solve the first half
of the problem, that of the control, in the
interest of the consumer, of the credit issued
to manufacturers, we have to put control of
the policy of the banks at the disposal of the
consumer interest.
If, at the same time, we wish to ensure that
the goods, when they are produced, are dis-
tributed amongst the individuals in whose
interest, ex hypothesi, they were made, we
have to get the credit purchasing power which
attends the capacity to make and deliver them
into the hands of those individuals. We can
deal with this latter problem in two possible
ways — either by a gift of Treasury " money "
obtained by a creation of credit, or by reducing
prices below cost to the individual consumer,
and then making up this difference between
price and cost by a Treasury issue to the
producer. I hope you realise that the only
basis for such a credit issue is the difference
between what the productive organisation
is called upon to deliver and what it could
29
THE CONTROL AND
deliver if its capacity were stretched to the
utmost.
The latter of the two foregoing aterlnatives
is, I think, by far the more practicable, because
it not only delivers the purchasing power at
the moment that it is wanted — at the moment
of purchase — but it is also far better adapted
to the psychology of the present time. It is
the method which has been embodied in the
suggestions which Mr A. R. Orage and I have
been endeavouring to bring to the notice of
the public in the Draft Scheme for the Mining
Industry.
This scheme has been fairly widely discussed,
both here and in America, but there is one
feature of it which will perhaps bear a little
elaboration — the obvious traversing of all
accepted Socialist policy in the provision not
only for the continuance of dividends to present
shareholders, but the wide extension of those
dividends to still more shareholders. I will
not take up your time with the philosophic
basis of the proposal, although it has such a
basis ; but would merely draw your attention
once again to the quite undeniable fact that
30
I
DISTRIBUTION OF PRODUCTION
there is simply not room in econotnic industry
— by which I mean industry financed from
public credit — for more than a small and
decreasing fraction of the available labour.
The attempt to cram all this human energy
into a function of society which has no need
of it is neither more nor less than lunacy. But
we have to recognise, as a matter of common
sense, that to throw a large and inexperienced
section of the population out of its usual
pursuits suddenly, and without preparation,
and with more spending power than it has the
training to use, might have a number of un-
pleasant consequences. I do not believe for
one moment in all the nonsense talked about
work and drink being the only alternatives of
the British working-man — it is a gross calumny;
but a smooth and rapid transition stage is
desirable, and that is provided in the scheme
by the increasing substitution of wages by
dividends. When this process had proceeded
far enough we should have defeated also one of
the worst features of the present system, which
is unable to distribute goods made and stored,
without making more goods, whether these are
31
THE CONTROL AND
required or not, merely for the purpose of
distributing purchasing power. You will no
doubt ask what are the prospects of such a
scheme as we are considering.
Well, in the first place, it has to be observed
that the unco-ordinated parts of it are coming
into being with tremendous rapidity and, to
those who have eyes to see, with irresistible
momentum. In this country it is quite obvious
that not only cannot the public debt (all issues
of securities, whether to so-called private com-
panies, local authorities or Govermental bodies,
are public debt fundamentally) be reduced, but
the business of the country cannot be carried
on for a month without a continuous increase
in it. The immediate effect of an attempt to
restrict the flow is a slump in trade and an
avalanche of business crises, which is only just
beginning, but which will, unless I am very
much mistaken, or war provides an alternative,
proceed to lengths quite suflQ.cient to establish
the principle.
The mechanism is being forged. The
Brotherhood of Locomotive Engineers in
America has, on the first of this month, opened
32
DISTRIBUTION OF PRODUCTION
the doors of the first of a series of banks
whose credit rests fundamentally on the rail-
way services of the American continent, not
on the cash in the vaults of the bank. The
Confederation General de Travail is about to
inaugurate a bank with a nominal capital of
25,000,000 francs on the same lines. These are
the beginnings of the shifting of control.
The operations of these organisations will,
in the first place, assist in raising prices — in
fact, by enormously enhancing the economic
power of Labour, will tend to raise them con-
siderably. But as the toothache is the only
agency which will drive the majority of people
to a dentist, there will be posed thereby a
plain issue — and to that issue I do not know
any other reply than that I have endeavoured,
so far as time has allowed, to put before you.
33
CHAPTER II
THE CONTROL OP POLICY IN INDUSTRY
Your Principal has been flattering enough to
suggest that you might be interested to listen
for a short time to-night to certain ideas on
the subject of the industrial problems which
have been made public, for the most part,
through the columns of The New Age. Before
proceeding to the concrete proposals, I should
like, with your permission, to go over the
philosophy of them very briefly.
In any undertaking in which men engage,
to paraphrase the ever-green Sir W. S. Gilbert,
there are always at least two fundamental as-
pects which demand recognition before success
can possibly be expected to accrue to those
engaged in it. These are that there must first
be a clear, well-defined policy, which means
that every person who has any right to be
heard in the matter in hand shall agree as to
the results which he is willing to further with
his support. And there must be somewhere
34
DISTRIBUTION OF PRODUCTION
resident in the venture some person or persons
with expert knowledge as to the technical pro-
cesses by which those results can be achieved
with the materials (using the word in its
broader sense) at the disposal of those as-
sociated together, and this person must have
the confidence of the remainder.
I should like you to observe particularly
that certain very important — in fact, quite
fundamental — relationships proceed from these
simple premises. The genesis of such an
association is agreement that a certain result
is desirable and a general belief that it can be
attained — it is not at all necessary that all of
those associated shall know how to attain the
result, but it is vital that they shall be satisfied
with it. We may imagine this association to
be the community. Secondly, the person or
persons who " know how," who collectively
we may call the producers, who will be em-
powered by the community to materialise the
results of the agreed policy, stand fundament-
ally and unalterably on a basis of Service — it
is their business to deliver the goods to order,
not to make terms about them, because it is
36
THE CONTROL AND
the basis of the whole arrangement that the
general interest is best served by this relation-
ship. (This applies, of course, to their simple
function of producers, not to their comprehen-
sive, all-embracing r61e of individuals.) Sub-
ject to this fundamental provision that they
deliver the goods to order, it is no business of
the controllers of policy, the community, how
the producers deliver them — that is a matter
for agreement amongst the producers.
The goods having been delivered to order,
it is the business of the community, to whose
order they were made, to dispose of them —
not the business of the producers, who would
never have been able to function without the
consent of society.
Now in the present dissatisfaction with the
productive system which is the outstanding
feature of the present time there is a remark-
able misdirection of attack — the battle front
is aligned as between employer and employed,
the so-called Capitalist and Labour, whereas
the real cleavage is between '' producer-
distributor" (both controlled by the financier)
and consumer — employers and employed
36
DISTRIBUTION OF PRODUCTION
forming the producer-distributor army, and
the whole community, which includes the
producers, forming the opposition. If any-
one doubts this, a consideration of the
facility with which Labour obtains increases
of pay, just so long as these increases can be
recovered from the public in the form of
increased prices, will surely dispel the doubt.
The position, therefore, is one of civil war of
the gravest character — gravest because the
" victory " of either side means the destruction
of both .
Before proceeding to the consideration of
the means available to meet this situation,
it is necessary to be clear on the matter of
policy.
There is no possible definition of a policy
which is all-embracing in its acceptance other
than the word " Freedom." People only
unite in wanting what they want. We shall
never get one inch farther along the road to
a final settlement of world problems until we
make up our minds for good and all whether
a man is in the largest sense more benefited
by learning, through trial and error, what is
37
THE CONTROL AND
good for him, or, on the other hand, whether
he should be ruled in the way he should go
by Authority.
Personally I am convinced that the former
conclusion is inevitable. The dictatorship of
the proletariat or any other comprehensive
dictatorship is intolerable and impracticable.
Please note that I am referring to man as an
individual — not as a producer. The technique
of production is a matter of Law, not of Emotion
and Desire, and I believe that a much more
exacting discipline will be expected of those
of all ranks who are privileged to serve the
community in any capacity, and that the
penalty of failure to live up to that discipline
will be the loss of that privilege, which will
be a much greater loss when no economic
question enters into it.
It used to be a very common argument that
the spur of economic necessity was ennobling
to the character. Frankly, I don't believe it.
If you will, and I am sure you will, look at
the question from a detached point of view,
I think you wiU agree that the man who is
engaged in " making money " is neither so
38
^1
DISTRIBUTION OF PRODUCTION
pleasant or so broad-minded to deal with, nor
80 fundamentally efficient, as the man who,
while yet exerting his capacity for useful
effort to the utmost, is by fortune lifted above
the necessity of considering his own economic
advantage. The struggle to overcome diffi-
culties is most unquestionably ennobling, but
we have, I think, reached a stage when our
attention may with advantage be diverted
from the somewhat sordid struggle for mere
existence.
We want, therefore, to put more and finally '
all people in this position, not to remove from
it those who are already there, always assuming
that the alternative exists ; and to do that
we want so to organise the machinery of pro-
duction that it serves the single end of forming
the most perfect instrument possible with which
to carry out the policy of the community ; and
so to empower the community that individuals
will submit themselves voluntarily to the
discipline of the productive process, because
in the first place they know that it is operated
for production and so gains their primary ends
with a minimum of exertion, and in the second
39
THE CONTROL AND
place because of the interest and satisfaction
of co-operative, co-ordinated ef!ort. You will
understand that the physical facts of produc-
tion are such that, operated in this way, only
a small proportion of the world's population,
working short hours, could find employment
directly in the industrial process — a condition
of affairs which is cumulative and reduces to
an anachronism the complaint of the early
Victorian Socialist against the idle rich, and
to an absurdity the super-Industrialist cry for
greater production at a cost of harder work.
To anyone to whom this aspect of the case is
unfamiliar, I would commend the works of
Mr Thorstein Veblen on Capitalist Sabotage,
or the more specialised conclusions of the late
H. M. Gantt and his partner, Mr Walter
Polakov. The present preoccupation of the
financial system is to hide the enormous
capacity for output which modern methods
have placed at our disposal ; and it is fairly
successful in its efforts, so far.
So much for the philosophy of the subject.
If you agree with it you wiU. see at once that
the problem with which society has to grapple
40
I
DISTRIBUTION OF PRODUCTION
falls naturally and inevitably into certain lines.
The 'primary object of the whole industrial
system should be the delivery to individuals,
associated together as the public, or society,
of the material goods and services they indi-
vidually require. This demand of individuals,
be it emphasised, is the absolute origin of all
activity. Since men co-operate to satisfy this
demand, which is complex in its nature, it is
necessary to also combine the demand, and
this combined demand of society is the policy,
so far as it is economic, of society as a whole.
The first part of the problem, then, consists in
j&nding a mechanism which will impose this
policy on the co-operating producers with the
maximum effectiveness, which always means
with the minimum of friction.
Now, if I have made my meaning clear, you
will begin to see (willingly or otherwise !) that
this has nothing to do with " workshop control
by the workers " — in fact is in one sense the
antithesis of it. It involves the assumption
that the plant of civilisation belongs to the
community, not to the operators, and the
community can, or should, be able to appoint
41
THE CONTROL AND
or dismiss anyone who in its discretion fails
to use that plant to the best advantage. So
far you might say this is pure State Socialism,
but I think you will agree, if I make myself
clear, that it is nothing like what is commonly
so called. In this connection the following
paragraph from The Threefold State, by Dr
Rudolf Steiner, a book which is attracting
attention on the Continent, may be of
interest : —
" Modern socialism is absolutely justified
1 in demanding that the present-day methods,
• under which production is carried on for in-
I dividual profit, should be replaced by others,
' under which production will be carried on for
\ the sake of the common consumption. But it
is just the person who most thoroughly recog-
nises the justice of this demand who will find
himself unable to concur in the conclusion
which modern socialism deduces : That, there-
fore, the means of production must be
transferred from private to communal owner-
ship. Rather he will be forced to a conclu-
sion that is quite different, namely : That
whatever is privately produced by means
42
I
m BIS
DISTRIBUTION OF PRODUCTION
of individual energies and talents must find
its way to the community tlirougli the right
channels."
The radical difierence — and I would com-
mend it to your most serious consideration —
is that State Socialism is based on the premise
that, firstly, the control of policy is resident
in administration, and, secondly, that it is
possible to " socially " control administration,
and, thirdly, that the State should be able to
supply economic pressure to the individual ;
whereas I suggest to you that the control of
policy is resident in credit (fundamentally,
in the belief in the beneficial outcome of any
line or action) and its financial derivations, of
which money is one, while administration is
a technical and expert matter not susceptible
of being socialised, and, lastly, that the only
possible method by which the highest civilisa-
tion can be reached is to make it impossible
for either the State or any other body to apply
economic pressure to any individual.
Any attempt either to socialise administra-
tion or to govern by economic coercion quite
inevitably leads to centralised organisation and
43
THE CONTROL AND
centralised credit, resulting in all the well-
known phenomena of inefficiency inseparable
from the attempted subordination of the
human ego to the necessities of a non-human
system. The difference is the recognition of
the difference between beneficial ownership
and administrative ownership. The managing
director of the White Star Line was in bene-
ficial ownership of the Titanic, he controlled
the credit of it ; but his attempt to interfere
in its administration destroyed the Titanic.
We can, then, for the moment leave the
question of administration where it stands,
the more so if you will consider that, however
centain enthusiasts may endeavour to persuade
you to the contrary, it is a well-recognised fact
that it is impossible, in this country at any rate,
to promote a strike of any magnitude on any
basis but that of distribution — i.e. wages or
prices — which only shows the general good
sense of the British public.
It is not suggested that administration is
faultless, but by deferring the consideration of
it — for it is essentially a technical matter — we
are free to concentrate on the primary requisite
44
DISTRIBUTION OF PRODUCTION
— the transfer of the control of the policy of
production into the hands of those for whom
the whole productive process exists — the in-
dividuals who collectively form the public.
As has been stated, the control of policy is
resident in credit — a word which is quite
sufficient, I have no doubt, to excite your worst
forebodings, but I assure you that in itself the
matter is very simple. A credit instrument is
something which will enable you to get what
you want. If you are stranded without food
on an island overrun with rabbits, a shot-
cartridge is in all probability the most effective
credit instrument with which to deal with the
situation, but in more highly organised com-
munities the instrument in most general use,
and which typifiies the rest, is what we call
money. It differs from a cartridge chiefly
in disappearing less noisily.
It is absolutely vital to realise that the es-
sential part of money is the belief that through
its agency you can satisfy your demands.
Once this is agreed you will see that the
control of the issue of something which em-
bodies this belief is equivalent to the control
45
THE CONTROL AND
of the policy of society. The belief, if well
founded, is real credit, and its vehicle, financial
credit, convertible into money.
There exists in civilised society in all
countries to-day an institution whose business
it is to issue money. This institution is called
a bank. The banking business is in many re-
spects the exact opposite of the Social Keform
business — it is immensely powerful, talks very
little, acts quickly, knows what it wants,
chooses its employees wisely in its own
interests.
When a bank allows a manufacturer an
overdraft for the purpose of carrying out a
contract or a production programme, it per-
forms an absolutely vital function, without
which production would stop. If you doubt
this, consider for a moment the result of a rise
in the bank rate of interest on loans and you
will see that the power to choke off producers
by taxing them at will is essentially similar to
that exercised by governments on consumers
by orthodox taxation, with the vital difference
that in the first case a purely sectional interest
is operating uncontrolled by society, whereas
46
i
DISTRIBUTION OF PRODUCTION
in the second case the power undoubtedly
exists, though ineffective because misunder-
stood, to control it in the general interest.
Now the vital thing done by a bank in
its financing aspect is to mobilise effective
demand.
The effective demand is that of the public, based
on the money of the public, and the willingness of
producers to respond to economic orders ; but the
paramount policy which directs the mobilisation
is anti-public, because it aims at depriving, with
the greatest possible rapidity, the public of the
means to make its demands effective ; through
the agency of prices.
I would particularly ask you to note that
there is no suggestion that bankers, as human
beings, are in the main actuated by any such
anti-social policy — the system is such that they
simply cannot help the result.
In order, then, to acquire public control of
economic policy, we have to control the whole
mechanism of effective demand — the rate at
which its vehicle, financial credit, is issued,
the conditions on which it is issued, and take
such measures as will ensure that the public,
47
THE CONTROL AND
from whom it arises, are penalised by with-
drawal of the vehicle to the minimum possible
extent. It must be obvious that the real
limit of the rate at which something repre-
senting purchasing-power could be issued to the
public is equal to the maximum rate at which
goods can be produced, whereas the " taking
back " through prices of this purchasing-power
should be the equivalent of the fraction of this
potential production which is delivered.
Let us imagine that wages, salaries and
dividends, added together, were issued via the
productive industries at a rate representing
the maximum possible production of ultimate
products, and actual consumption was only
one quarter of potential production. Then,
clearly, the community would only have
exercised one quarter of its potential demand.
But the whole of the costs of production —
the issues of purchasing-power through the
agencies of wages, salaries and dividends —
would have to be allocated to the actuxil pro-
duction as at present, and if we charge the
public with the whole cost of production their
total effective demand is taken from them.
48
DISTRIBUTION OF PRODUCTION
But if we apply to the ascertained cost of
production a fractional multiplier equal to the
ratio of actual consumption to potential pro-
duction, then we take back in prices that
portion of the total purchasing-power which
represents the actual energy draft on the
productive resources of the community, and
the price to the actual consumer would be,
in the case above mentioned, 75 per cent, less
than commercial cost.
If I have made myself clear you will see
that credit-issue and price-making are the
positive and negative aspects of the same
thing, and we can only control the economic
situation by controlling both of them — not
one at a time, but both together, and in order
to do this it is necessary to transfer the
basis of the credit -system entirely away from
currency, on which it now rests, to useful
productive capacity. The issue of credit in-
struments will then not result in an expansion
of money for the same or a diminishing amount
of goods, which is inflation, but in an expan-
sion of goods for the same or a diminishing
amount of money, which is deflation.
D 49
DISTRIBUTION OF PRODUCTION
I may perhaps be permitted to end on a
graver note. The present maladministration
of credit results in increasingly embittered j
struggles for markets. Unless it is remedied, ,
war is inevitable — and the next, great war
will destrov this civilisation.
I
00
CHAPTER III
THE CONTROL OF PRODUCTION
It has frequently and rightly been emphasised
that the essence of any real progress towards
a better condition of society resides in the
acquisition of control of its functions by those
who are affected by its structure ; and it is
well if somewhat vaguely recognised by the
worker of all classes that this control is at
present not resident in, but is external to,
society itself, and that in consequence men and
women, instead of rising to an ever superior
control of circumstance, remain the slaves of a
system they did not make and have not so far
been able to alter in its fundamentals.
This system is assailed under the name of
Capitalism ; but of the millions who are con-
vinced that by the destruction of Capitalism
the Millennium wiU be achieved, not very
many have yet awakened to the fact that
Capitalism died an unhallowed death seventy-
five years ago, more or less, and that the
61
THE CONTROL AND
driving force of the system which, more than
any other single cause, has produced the
tangle of misery and unrest in which the world
now welters is Creditism.
Credit is a real thing ; it is the correct
estimate of capacity to achieve, and the
function and immense importance for good or
evil of this real credit will be impressed on
mankind with cumulative insistence in the
difficult times ahead. But for the moment
it is desirable to consider a narrower use of
the word ; one conveying, however, a sense
with which it is more commonly associated —
financial credit.
Financial credit is simply an estimate of the
capacity to pay money — any sort of money
which is legal or customary tender ; it is not,
for instance, an estimate of capital possessed ;
and its use as a driving-force through the
creation of loan-credit is directly consequent on
this definition. The British banMng system
has, since the Banking Act of 1844, based its
operations on the ultimate liability to pay
gold, but in actual fact the community, as
a whole, has dethroned gold, and bases its
DISTRIBUTION OF PRODUCTION
acceptance of cheques and bills on its estimate
of the bank credit of the individual or corpora-
tion issuing the document, and for practical
purposes not at all on the likelihood that the
bank will meet the document with gold. This
bank credit simply consists of certain figures
in a ledger combined with the willingness of
the bank to manipulate those figures and at
call to convert them into legal tender. What,
then, is likely to induce a bank to increase the
credit by the creation of loans, etc., of an
applicant for that favour ? The answer is
contained in the definition : the capacity to
pay money ; and the credit will be extended
absolutely and solely as the officials concerned
are satisfied that this condition will be met.
It is quite immaterial whether the judgment
is based on existing " securities " or contem-
plated operations ; the basis of bank credit
to-day is simply and solely the capacity
within an agreed time-limit, which may be
long or short, to pay money.
Now apply the consideration of this to such
a problem as control of the provision of decent
housing for the miners at rents not exceeding
18
THE CONTROL AND
10 per cent, of tlie miners' earnings. There are
a number of idealists, who cannot be labelled
otherwise than half-baked, who wiU say that
it is a " sound business proposition " to house
the miners properly at low rents. There are
also a number of people by no means half-
baked who are prepared to lose a little on
housing to retain control of industry. That
it is in the highest sense sound is unquestion-
able ; but as to being a business proposition
we suggest to those well-meaning people of the
first class whose minds are above detail, that
they go to the banks unsupported by security,
and endeavour to borrow money for such a
project.
We see, then, that it is purely a question of
the financial effect likely to accrue from an
enterprise which will induce the banks to back
it with credit, and the use-value or inherent
desirability of doing certain work is a by-
product. But the deduction to be made
from this is of transcendent importance — it
is that to control industry in the interest
of use -values you must back use -values
with credit. And that means the control
54
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DISTRIBUTION OF PRODUCTION
of credit. And in order to control credit
the base on which it rests must be altered
to meet the changed aspirations of society.
The economic power of Labour is a potential
power. By withholding it, Labour (using the
term in its widest sense) can break down
civilisation ; but it cannot build it up again
by any agency that the mind of man has yet
conceived which does not involve the use of
credit in some form or other. The community
creates all the credit there is ; there is nothing
whatever to prevent the community entering
into its own and dwelling therein except it
shall be by sheer demonstrated inability to
seize the opportunity which at this very
moment lies open to it ; an opportunity which
if seized and used aright would within ten
years reduce class-war to an absurdity and
politics to the status of a disease.
55
CHAPTER IV
A MECHANICAL VIEW OF ECONOMICS
Elsewhere an attempt has been made to
show the dangerously false premises on which
the New Unionist party bases all its hopes of
Reconstruction. The keynote of the symphony
we are to play under the conduct of Mr Lloyd
George and the industrial federations behind
him is production, production, yet more pro-
duction ; and by this simple remedy we are
to change from a nation with a 03 population
and many grievances into a band of busy B's
(or is it Al's ?) healthy, wealthy, happy and
wise.
It is a simple little remedy — one wonders
why we never thought of it before. You
seize any unconsidered trifle of matter which
may be lying about, preferably on your
neighbour's territory, and you make it into
something else quite unspecified. You assert
by a process of arithmetical legerdemain
known as cost accounting that the value of
56
DISTRIBUTION OF PRODUCTION
tlie original matter wliicli we may call " a "
is now a + (b+c) + (d+e), " b " being labour,
" c " overhead charges, " d " selling charges
and " e " profit, and that the " wealth " of
the country is increased by this operation in
respect of a sum equal to (b +c +d +e). With
the aid of your banking system you now create
credits which show that "a" is a+etc —
(x+y) (where " x " is loss in trading, etc., and
" y " is depreciation) and there you are — Al.
The chief objection to this otherwise fascin-
ating idea is that despite a large body of most
respectable and even highly paid accountants
and bankers who will produce quantities of
figures to prove that " a " has now become
(a+b, etc.) and that the wealth of the country
has been increased, etc., etc., the facts do not,
unfortunately, confirm their statements.
The power used in doing work on " a " has
been dissipated in heat and otherwise ; the
tools have been worn, the workmen have con-
sumed food and clothes and have occupied
houses, and what you have actually got is " a "
minus any 'portion of ^' a^^ lost in conversion ;
b, c, d, c, etc., are the price paid by the com-
57
THE CONTROL AND
munity for the increased adaptability of "a "
to the needs of the community, which price
must in the last event be paid for in energy.
The question of the gain in adaptability de-
pends on what you produce ; but payment is
inevitable.
Under the existing conditions probably no
body of men has done more to crystallise the
data on which we carry on the business of the
world than has the accounting profession ; but
the utter confusion of thought which has un-
doubtedly arisen from the calm assumption
of the book-keeper and the accountant that he
and he alone was in a position to assign positive
or negative values to the quantities repre-
sented by his figures is one of the outstanding
curiosities of the industrial system ; and the
attempt to mould the activities of a great
empire on such a basis is surely the final
condemnation of an out- worn method.
While the effect of the concrete sum dis-
tributed as profit is overrated in the attacks
made on the capitalistic system, and is far and
increasingly less important than the overhead
charges added to the value of the product in
58
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DISTRIBUTION OF PRODUCTION
computing its factoiy cost, it is tlie dominant
factor in the political aspect of the situation,
because the equation of production is stated
by the capitalist in a form which requires it
to be solved in terms of selling price, while
" e," the profit, is always a plus quantity.
Now the prime necessity of the situation,
which is world-wide at this time, is to realise
that in economics we are dealing with facts
and not figures ; and mechanical facts at that .
The conversion of a bar of iron into a nut and
bolt and its change in price from 2d. or 3d. to,
say, Is. means absolutely nothing at all beyond
the fact that we have transformed a certain
amount of potential energy into work in the
process of changing the bar of iron into a nut
and bolt, and that an arbitrary and totUay
empirical measure of this potential energy in
various forms is contained in the figures of
cost. The factor which gives real character
to the operation is the " inducement to
produce."
If the object of this use of material and
energy is simply finance, we shall get a financial
result of some sort — but two real things result
59
THE CONTROL AND
in any case. First we have definitely decreased
the energy potentially available for all other
purposes, and, secondly, we have obtained
simply a nut and bolt in return for a bar of
iron and a definite amount of energy dissipated.
If by wealth is meant the original meaning
attached to the word — " well-being "—the
value in well-being to be attached to our bolt
and nut depends entirely on its use for the
promotion of well-being (unless we admire
bolts and nuts as ornaments), and bears no
relation whatever to the empirical process of
giving values to a, b and c, etc.
Let us particularise : The immediate neces-
sity as to which all political parties are agreed
is improved housing. The financier says ;
" Yes, you shall have money for housing as the
result of building gunboats for Chile," thereby
implying that there is a chain of causation
between gunboats for Chile and houses for
Camberwell. Not only is there no such real
chain of causation, but the building of gun-
boats for Chile, or elsewhere, decreases the
energy available to build those houses, and
when the total available energy is utilised, as
60
DISTRIBUTION OF PRODUCTION
has been approximately the case during the
war, and may easily be so again, not all the
gunboats ever sold, no matter what the ac-
counting figures attached to the transaction
may indicate in added wealth to this country,
will produce one house at Camberwell, or
anywhere else. What is, of course, common
to the two is the " inducement to produce,"
but that may or may not be a sound induce-
ment.
• The matter is really very serious. The
economic effect of charging all the waste in
industry to the consumer so curtails his
purchasing power that an increasing percent-
age of the product of industry must be ex-
ported. The effect of this on the worker is
that he has to do many times the amount of
work which should be necessary to keep him
in the highest standard of living, as a result
of an artificial inducement to produce things
he does not want, which he cannot buy, and
which are of no use to the attainment of his
internal standard of well-being. "While the
mechanism of the process is possibly too
technical for his general comprehension, he
61
DISTRIBUTION OF PRODUCTION
has grasped the drift of the situation and shows
every sign of a determination to make things
interesting. On the other hand, we see a
good sound reason for the capitalist's hatred
for internationalism ; failing interplanetary
commerce, he will have nowhere to export to,
and will be faced with the horrible prospect
of dividing up the world's production amongst
the individuals who live here. In which case
a larger number of people than at present will
agree that it is possible to overproduce gun-
boats. Given this situation, what wiU be the
result of a " strong " Coalition Government ?
63
CHAPTEE V
PRODUCTION AND PRICES
It is admitted by almost everyone not utterly
blind to the trend of public events tbat tbere is
something seriously wrong in the world to-day.
Hardly yet have the hospitals discharged the
casualties of the first World War, yet the
shadow of an even greater catastrophe is plain
to those with eyes to see. Instead of the world
for heroes to live in, one strike follows another
to an inconclusive settlement ; an apathetic
public regards the conflict between " Capital "
and " Labour " with a lack-lustre eye, repeat-
ing the while the cliches of its particular brand
of millionaire- owned newspaper.
Amongst the experts, various prescriptions
for the disease of Society are propounded.
These are :
1. The Super-productionists, the "Capi-
talist " party, M^ho refuse to admit any fault
in the social system. The keynote of their
remedy is harder work and more of it.
2. What may be called the ecclesiastical
party ; the keynote of their policy is " a change
63
THE CONTROL AND
of heart." Their attention is concentrated in
hierarchical problems, administration, etc. The
legal, military, bureaucratic mind is essentially
of this type, and the Whitley Council, the
Sankey Report, and the various committee
schemes of the Fabian Society in this country,
the Plumb scheme in America, etc., are ex-
amples of it. AH these schemes are deductive
in character ; they start with a theory of a
different sort of society to the one we know,
and assume that the problem is to change the
world into that form. In consequence, all the
solutions demand centralisation of administra-
tion ; they involve a machinery by which
individuals can be forced to do something —
work, fight, etc. ; the machine must be stronger
than the man.
Practically all socialist schemes, as well as
Trust, Capitalist, Militarist, etc., schemes, are
of this character— e.^. the League of Nations,
which is essentially ecclesiastical in origin, is
probably the final instance of this.
It may be observed, however, that in the
world in which things are actually done, not
talked about, where bridges are built, engines
are made, armies fight, we do not work that
64
i
DISTRIBUTION OF PRODUCTION
way. We do not sit down in London and say
the Forth Bridge ought to be 500 yards long
and 50 ft. high, and then make such a bridge
and narrow down the Firth of Forth by about
75 per cent, and cut off the masts of every
steamer 45 ft. above sea-level in order to make
them pass under it. We measure the Firth,
observe the ships, and make our structure fit
our facts. Successful generals do not say,
" The proper place to fight the battle is at X,
I am not interested in what the other fellow is
doing, I shall move all my troops there."
The attempt to deal with one of the in-
dustrial and social difficulties existing at this
time, which is embodied in these remarks,
starts from this position therefore.
It does not attempt to suggest what people
ought to want, but rather what they do want,
and is arrived at not so much from any theory
of political economy as from a fairly close
acquaintance with what is actually happening
in those spheres where production takes place
and prices are fixed.
If we look at the problem of production from
this point of view, the first thing we ask
ourselves is, Why do we produce now ? The
B 66
THE CONTROL AND
answer to this is vital — it is to make money.
Why do we want to make money ? The
answer is twofold. First, to get goods and
services afterwards, to give expression, often
perverted, to the creative instinct through
power. Please note that these two are quite
separate — whether a man has any recognisable
creative instinct or not, he absolutely requires
goods and services of some sort. We then
have our problem stated ; we have to inquire
whether our present mechanism satisfies it,
and if not, why not, and how can it be altered
so that it does satisfy it.
Emphasising the fact that it is only half the
problem, the only half I propose to deal with
to-night, let us inquire to what extent we suc-
ceed in our primary object — that of obtaining
goods and services when we produce for money
under the existing economic system.
Production only takes place at present when
at least two conditions are met, when the
article produced meets with an effective de-
mand — that is to say, when people with the
means to pay are willing to buy, and when
the price at which they are willing to buy is
one at which the producers are willing to sell.
66
DISTRIBUTION OF PRODUCTION
Now under the private capitalistic system
the price at which the producer is willing to
sell is the sum of all the expenses to which he
has been put plus all the remuneration he can
get called profit. The essential 'point to notice, \
however, is not the profit, hut that he cannot and
mil not produce unless his expenses on the
average are more than covered. These expenses
may be of various descriptions, but they can
all be resolved ultimately into labour charges
of some sort (a fact which incidentally is
responsible for the fallacy that labour, by
which is meant the labour of the present
population of the world, produces all wealth).
Consider what this means. All past labour,
represented by money charges, goes into cost
and so into price. But a great part of the
product of this labour — that part which re-
presents consumption and depreciation — has
become useless, and disappeared. Its money
equivalent has also disappeared from the hand
of the general public — a fact which is easily
verifiable by comparing the wages paid in
Industry with the sums deposited in the
Savings Banks and elsewhere — but it still
remains in price. So that if everyone had
m
THE CONTROL AND
equal remuneration and equal purchasing
power, and there were no other elements^ the
position would be one of absolute stagnation
— it would be impossible to buy at any price
at which it is possible to produce, and there
would be no production. I may say that in
spite of enormously modifying circumstances I
believe that to be very much the case at present.
But there is a profound modifying factor,
the factor of credit. Basing their operations
fundamentally on faith — that faith which in
sober truth moves mountains — the banks
manufacture purchasing power by allowing
overdrafts, and by other devices, to the
entrepreneur class : in common phrase, the
Capitalist. Now consider the position of this
person. He has large purchasing power, but
his personal consuming power is like that of
any other human being : he requires food,
clothes, lodging, etc.
If, as is increasingly the case, the personal
Capitalist is replaced by a Trust, there is a
somewhat larger personal consuming power,
represented by the stockholders, but it is still
incomparably below the purchasirg power
represented by credit. "What happens ? After
68
DISTRIBUTION OF PRODUCTION
exhausting the possibilities of luxuries, the or-
ganisation itself exercises the purchasing power
and buys the goods and services which it itself
consumes — machinery, raw material, etc. In
consequence, the production which is stimu-
lated — the production which we are asked
to increase — is that which is required by
the industrial machine, intermediate products
or semi-manufactures, not that required by
humanity. It is perfectly true that money is
distributed in this process, but the ratio of this
money to the price- value of human necessities
— ultimate products — is constantly decreasing
for the reasons shown, and the cost of living
is therefore constantly rising.
Before turning to the examination of the
remedy built upon this diagnosis it is neces-
sary to emphasise a feature of our economic
system which is vital to the condition in which
we find ourselves — i.e. that the wages, etc.,
system distributes goods and services through
the same agency by which it produces goods
and services — the productive system. In other
words, it is quite immaterial how many com-
modities there are in the world, the general
public cannot touch them without doing more
89
THE CONTROL AND
work and producing more commodities. It is
my own opinion, not lightly arrived at, that
that is the condition of affairs in the world
to-day — that there is little if any real shortage,
but that production is hampered by prices, and
the capitalists cannot drop prices without
losing control. However that may be, this
feature, in conjunction with those previously
examined, has many far-reaching consequences
— amongst others the feverish struggle for
markets, which in turn has an overwhelmingly
important bearing on Foreign Policy. To sum
the whole matter up, the existing economic
arrangements —
1. Make credit the most important factor
in effective demand ;
2. Base credit on the pursuit of a financial
objective, and centralise it ;
3. This involves constantly expanding pro-
duction ;
4. This must find an effective demand,
which means export and more credit ;
6. Makes price a linear function of cost,
and so limits distribution, largely to
those with large credits ;
70
DISTRIBUTION OF PRODUCTION
6. Therefore directs production into channels
desired by those with the largest
credits.
A careful consideration of these factors will
lead to the conclusion that loan-credit is the
form of effective demand most suitable for
stimulating semi-manufactures, plant, inter-
mediate products, etc., and that " cash "-
credit is required for ultimate products for
real personal consumption. The control of
production, therefore, is a problem of the
control of loan-credit, while the distribution
of ultimate products is a problem of the
adjustment of prices to cash-credits. It is
only with this latter that we are at present
concerned.
We have already seen that the cash-credit
provided by the whole of the money distributed
by the industrial system, so far as it concerns
the wage-earner, is only sufficient to provide
a small surplus over the cost of the present
standard of living, and that only by conditions
of employment which the workers repudiate,
and rightly repudiate. We cannot create a
greater surplus by increasing wages, because
71
THE CONTROL AND
the increase is reflected in a compound rise in
prices. Keeping, for the moment, wages con-
stant, we have to inquire what prices ought to
be to ensure proper distribution.
Now the core of this 'problem is the fact that
money which is distributed in respect of articles
which do not come into the buying range of the
persons to whom tlie money is distributed is not
real money — it is simply inflation of currency
so far as those persons are concerned. The
public does not buy machinery, industrial
buildings, etc., for personal consumption at aU.
So that, as we have to distribute wages in
respect of aU these things, and we want to
make these wages real money, we have to
establish a relation between total production,
represented by total wages, salaries, etc., and
total ultimate consumption, so that whatever
money a man receives, it is real purchasing
power. This relation is the ratio which total
production of all descriptions bears to total
consumption and depreciation.
The total money distributed represents total
production. If prices are arranged as at pre-
sent, so that this total will only buy a portion
72
DISTRIBUTION OF PRODUCTION
of tlie supply of ultimate products, then all
intermediate products must be paid for in
some other way. They are ; they are paid for
by internal and external (export) loan-credit.
If prices are arranged so that they bear the
same relation to cost that consumption does
to '^preciation, then every man's money wiU
buy him his average share of the total con-
sumption, leaving him with a balance which
represents his credit in respect of his share in-
the production of intermediate products (semi-
manufactures) — a share to which he is entitled, ^
but which is now almost entirely controlled by \
the financier in partnership with the industrial
price-fixer.
It is a little difficult to state with any
accuracy what proportion of cost prices ought
to be because of the distorting effect of waste,
sabotage and aimless luxury.
I am making some rather tedious investiga-
tions into this, and I can only say that I am
convinced that even now prices are five times
too high, and that with proper direction of
production this figure would be greatly ex-
ceeded.
73
CHAPTER VI
WHAT IS CAPITALISM ?
When two opposing forces of sufficient
magnitude push transversely at either end of
a plank — or a problem — it revolves : there is
Revolution. When the forces are exhausted
the revolution subsides, and the plank or
problem remains in much the same position in
space which it occupied before the forces acted
on it. It is possible to conceive its molecules
as being somewhat worn and giddy as a result
of their rapid reorientation, but their environ-
ment is otherwise unchanged. If, however,
the forces act through the centre of resist-
ance, actual motion results ; the object is
shifted bodily by the greater force, without
revolution.
In the first portion of this metaphor is to be
found the explanation of the devastating in-
conclusiveness which dogs the steps of the
constant and increasingly embittered contro-
versy between the forces of what is called
74
I
DISTRIBUTION OF PRODUCTION
Capitalism and its antagonist Labour, and for
a recent instance of the phenomenon it is not
necessary to go further than the Coal Com-
mission. During the earlier part of the inquiry-
it was made abundantly plain that an in-
tolerable state of affairs existed in the coal
industry. Mr Smillie's attack was so well
delivered, the evidence marshalled was so
damning, that had the case been closed at that
point the position of the miners, and with them
Labour generally, would have been incon-
ceivably strengthened. But, unfortunately in
the general interest, the case was not closed
there. The ground was immediately shifted
to a discussion of the merits of private, as
opposed to nationalised, administration.
Now I suppose it is a thankless task to say
it, but the second question has about the same
relation to the subject matter of the attack
as has the strategy of a general to the pay
of his troops. In consequence the issue now
before the public is not whether the economic
contract between the miners as members of
the community, on the one hand, and the
mining industry controlled by the colliery
76
THE CONTROL AND
proprietors as producers for the community,
on the other, is a bad and inequitable contract,
but whether, under what is in essence the
same contract, the miners' scheme of organisa-
tion is a better scheme than the employers'.
Personally I very much doubt it.
This is a matter which affects the general
public quite as much as the miners themselves.
It is fairly obvious that, recognising that
Labour is determined to attack Capitalism,
and having themselves no delusions about the
real issue, the admirable brains behind the
Capitalist organisation have decided, while
providing just so much opposition as is
necessary to register a protest, to allow an
experiment on lines already discredited to
be made at the expense of the consumer,
in order that its stultification, which can be
insured, wiU strengthen Finance elsewhere.
Brer Rabbit, being in some danger, is be-
traying a special and exaggerated fear of
the briar bush.
This is, of course, all very adroit : it shifts
the opposing forces to the opposite ends of the
plank. The question for the molecules — the
76
DISTRIBUTION OF PRODUCTION
general public — however, is whetlier they care
about the resultant revolution. If not, then
their concern is to bring the opposing forces
into line — to see that Labour is attacking what
Finance is reaUy concerned to defend.
The general public is more likely to do this
if it can be brought to realise that it is really
as members of the community, not as artisans,
that the attack is operating.
The whole tendency of Trade Unionist, just
as much as Capitalistic, propaganda is to
obscure this fact, and by so doing split the
offensive, but the most superficial considera-
tion of the root idea of the existing economic
system will establish it.
" Capitalism " is not a system of administra-
tion at all ; it is a system of fixing prices in
relation to costs. This is not to say, of course,
that the personnel and methods of administra-
tion would not be profoundly affected and
improved by a valid and radical modification of
the "capitalistic" — i. e. financial — system, but
such changes would be effects and not causes.
The root problem of civilisation — not the
only problem, but that which has to be disposed
77
THE CONTROL AND
of before any other — is the problem of the
provision of bed, board and clothes, and this
affects the ordinary man in terms of effort.
If he has to work hard and long hours to
obtain a precarious existence, then for him
civilisation fails. As the miner demonstrably
had to work longer for a lower standard of life,
measured in terms of purchasing power, than
existed in the fourteenth century in England,
then for him progress was not operative. But
the reason he has to do these things is not at
all that the coal mines are badly worked,
although it is quite possible that they might
be better worked, just as it is possible and
excusable that the miners' own efficiency is not
so high as it might be under better conditions.
The plain, simple English of the reason is that
his wages will not buy him the things he wants.
His own common-sense has consequently con-
sistently been applied to the problem of raising
his wages, but has for the most part stopped
for want of technical knowledge at the recogni-
tion of the effect of this on prices.
In the December 1918 number of The English
Review it was pointed out in a short article
78
I
DISTRIBUTION OF PRODUCTION
entitled " Tlie Delusion of Super-Production "
that the sum of the wages, salaries and divi-
dends distributed in respect of the world's
production was diminishingly able to buy that
production at the prices which the capitalist is
hy his system forced to charge. '* Profiteering,"
in the sense of charging exorbitant sums in
excess of cost, is a mere excrescence on the
system. If the producer could be imagined
as making no profit at all, the difficulty would
still exist, quite possibly in an exaggerated
form. That is why the policy of more and
yet more production at prices fixed on a basis
of cost and profit is a mere aggravation of the
prevailing difficulty. Because the available
purchasing power would absorb a decreasing
proportion of this production it must be either
exported or wasted, and both of these lead
straight to war, the supreme waster.
Now habits of thought are so powerful in
their influence that at first sight a statement
that the correct price of an article may be a
low percentage of its cost is apt to induce both
disbelief and ridicule. But if the matter be
attacked from the other end, if it be realised
79
THE CONTROL AND
that an article cannot be sold, nor can its
exchange through export be sold, unless its
average price is considerably less than cost ;
that if it cannot be sold the efiort expended
in making it is wasted ; that if it is exported
competitively every economic force is driving
the community irresistibly towards war ; it
may then be agreed that it is worth while to
consider whether the accepted principles of
price making are so sacred that a world must
be brought to ashes rather than that they should
be analysed and revised.
The analysis has been made ; and although
the methods by which the results are arrived
at are too technical for description in an
article of this character, it may be said that
the purchasing power of effort at this time
should be certainly not less than five times its
present return, and most probably very much
more. In other words, with wages at their
present level the cost of living ought to be
one-fifth or less of what it is. The essential
facts on which this statement is based are
that production is overwhelmingly dependent
on tool power and process ; that tool power
80
DISTRIBUTION OF PRODUCTION
and process are a cultural inheritance belonging
not to individuals but to tbe community, being
largely the result of work done by persons now
dead ; and that in consequence the equitable
return for effort includes a dividend on this
inheritance which is immeasurably larger than
the direct payment. Just as the time-rate of
production has diverged from that possible
to a community without tools, processes or
education, so to a corresponding degree has
the present economic system become inequit-
able and unsound.
It is a matter of simple fact that men do not
in the mass act together for ethical conceptions.
That is why a strike can always be settled for
the time on a money basis ; and the only
demand which wiU not be so disposed of is one
which promises more purchasing power by its
success than its opponents can in the nature
of things dispose of, because such a demand
will utterly divide them. But any demand
which savours of the perpetuation and ex-
tension of a bureaucracy which is already
highly unpopular will alienate not only the
general public but the organised worker.
7 81
CHAPTEE VII
THE QUESTION OF EXPORTS
I HAVE received two letters which seem to
indicate some confusion of thought as to the
bearing of a modified credit system on export
trade. Both these letters quote statistics of
wheat production and consumption with a
view to throwing some doubt on our capacity
to grow our own food. Now, ultimately,
statistics are indispensable to sound practical
politics, but to the writers of these letters, as
well as to others who may be tempted to attack
the problem on the basis of official statistics,
it may be emphasised that it is nearly irrelevant
to the primary issues whether this country can
feed its population off its own acreage or not.
It is quite arguable that it can ; and it is also
arguable that it would be bad business for it
to try. These issues are :
1. Are there inducements operating towards
the best use of the land we have ?
82
DISTRIBUTION OF PRODUCTION
2. If we export services (i.e. the energy
element of production) do we get the
best real price for them ?
In regard to 1, and leaving out of the argu-
ment, for the moment, the indisputable fact
that the acreage under wheat is steadily de-
creasing decade by decade, consider the posi-
tion of the farmer. He, like everyone else
at present, is in business to make money, not
to deliver goods. It is quite true that he
makes money by selling things, but he can
easily make more money by selling less goods
at a higher price than vice versa.
Now wheat is one of a fairly small group of
commodities over the price of which the in-
dividual producer has practically no control
whatever. It is a graded homogeneous pro-
duct bought in bulk by experts who have
a strictly finite demand for it, and the price
paid is under existing conditions purely fixed
by financial supply and demand, whether un-
fettered or artificially stimulated byrings, and is
not directly based on cost. Normally, a given
amount of foreign wheat is contracted for in
this country — bought on " futures " by grain
83
THE CONTROL AND
brokers whose price fixes a datum line for
home-grown wheat. So long as wheat is in
short supply as compared with the demand,
the price rises, and everyone engaged in the
grain trade, either as producer or dealer, may
benefit, although no doubt most of the benefit
goes to the dealer. The relation of the farmer
to this situation must surely be plain. The one
situation he must avoid at all costs is that
produced by throwing grain on the market in
any quantity which wiU bring down prices —
that is to say, slacken the demand or com-
petition to buy. His criterion of a satisfactory
output, therefore, bears no relation to what
amount of wheat the public requires, or what
amount the land wiU produce, but rests funda-
mentally on, firstly, the operations of the
grain brokers and, secondly, an estimate of
what margin of profit can be extracted from
the market by keeping it short of wheat with-
out causing a secondary movement of grain
from other markets. As transportation
facilities improve, the proposition becomes
less and less attractive to the farmer, who is
driven more and more to the production of
84
I
DISTRIBUTION OF PRODUCTION
perishable goods, sucli as eggs, butter and milk,
wbose nature enables him to control the local
market, or to the raising of stock on which the
transportation charges and risks are heavy.
The first prime question can therefore be
answered quite confidently in the negative.
In regard to the second point, let us assume
that the magnitude, at any rate of our imports
of foodstuffs, is a reasonable subject of dis-
cussion and policy. It is evident that there
is a point at which it is debatable whether we
should grow the last few million quarters of
wheat required on land which may not be of
the most suitable description, or whether it
is sound business management to obtain this
wheat by the exchange for it of manufactured
goods — that is to say, by an export of economic
energy. It does not take much consideration
to see that the answer to this is purely quan-
titative : how much wheat are we to get for a
given energy export ?
Consider the present situation. It is true
enough, as our super-industrialists and ortho-
dox economists are always telling us, that
imports are paid for by exports, but on the
85
THE CONTROL AND
whole, they are content to leave it at that.
They do not explain, for instance, how a
population which most certainly cannot, and
does not, buy its own total production for
cash (if it could, there would be no necessity
either for home or export credits, and no
*' unemployment " problem), can become able
to buy the imports which are exchanged for the
unpurchasable surplus. They do not, again,
explain how a textile worker, paid wages
for converting a bale of raw cotton worth,
say, £20 into goods worth, say, £60 can bene-
fit if in return for these manufactured goods
two more bales of raw cotton at £40 are received
— a condition common to trade booms. Nor
do they generally publish the fact that English
machinery is often sold to export agents
abroad at far lower prices than those at which
the same machinery can be obtained at home,
or that it is possible to buy, in the bazaars of
Bombay, a shirt made in Lancashire for a
quarter the price at which the same shirt can
be bought retail in Manchester.
The simple facts are that, under existing
arrangements, our principal preoccupation is
DISTRIBUTION OF PRODUCTION
the provision of employment — the makiug of
work. On this simple canon hangs the law
and the profits. When, therefore, a locomotive
is required for the Argentine, and assuming
for the moment that it is in any sense sold in
the open market, there is a competition, open
to the industrial nations of the world, to sell
locomotives and to buy wheat, with the usual
and logical result that wheat appreciates in
price in terms of locomotives, the industrial
exporting country continually gives more,
and the exporting agricultural country con-
tinually less, economic energy in every bargain.
That is the proposition in a nutshell. In
order to make a bargain which is just — i.e.
judicious — the industrial nation must be re-
stored to the position of a free, not a forced,
seller, just as to restore social equilibrium
inside the nation the individual must be put
in the position of a free, not a forced, worker.
The arrangements which would fulfil these
desiderata are already sufficiently familiar in
principle.
87
CHAPTER VIII
UNEMPLOYMENT AND WASTE
While it is necessary to bear in mind that the
object of industry should not be employment,
but rather the delivery of goods with a mini-
mum expenditure of energy on their production,
it is yet true that at the moment unemployment
does form a practical problem demanding
alleviating treatment. The word is generally
used to indicate labour unemployment, but it
is practically impossible to have any consider-
able volume of labour unemployment without
a capital unemployment representing many
times the production value of the idle labour.
To the extent that private capitalism in the
old sense can be said to exist, this is just as
great an evil to the capitalist as to the manual
worker, although its incidence may not be so
personal or so immediately tragic. It penalises
his initiative, depletes his reserves, and finally
bankrupts him ; and the whole of the process
is eventually an injury distributed over the
88
DISTRIBUTION OF PRODUCTION
community in general, resulting in a deteriora-
tion of moral, as well as in the more material
evil of a rise in prices.
It is particularly important to notice tlie
wastefulness of the system. A demand backed
by money arises in the community for a
particular class of goods ; an enterprising
manufacturer puts down a plant " at his own
expense," as the misleading phrase goes (it
is impossible for anyone to put down modern
plant at the expense of other than the general
consumer), and supplies the goods. This man
is a public benefactor ; he gives the public
what it wants, and he gives it much quicker
than it would be possible to get it by any other
system, because one man can make a decision
quicker than a dozen men, to say nothing of
a Government Department. A trade slump
comes ; unemployment grows like a snowball,
since every man thrown out of work is one man
less receiving money, and therefore one man
less in the market to buy goods ; our manu-
facturer, though stiU willing and able to make
his product, cannot sell it, and if this state of
affairs continues for any length of time he is
89
THE CONTROL AND
ruined. His business organisation is probably
excellent, but it is broken up and bis plant
dispersed, and when the trade revival comes a
new plant and a new organisation has again
to be constructed at the expense of the
consumer.
Both the employer and the employed are so
familiar with this cycle that both take steps
which they imagine will protect them against
its eSects, but which in fact only make con-
fusion worse confounded. During times of
brisk trade the employer charges the highest
price he can obtain, or, in other words, delivers
the minimum of goods for the maximum of
money, and embodies his large profits in in-
visible reserves, with the result that the con-
sumer is left without any effective demand
(demand backed by money) as soon as his
wages cease. The worker, sensing this, does
in his sphere precisely the same thing — he uses
his trade combinations to obtain the maxi-
mum amount of money for the minimum
amount of production, not realising that this
money simply goes into the cost of the pro-
duct, which has to be paid by the community
90
DISTRIBUTION OF PRODUCTION
of which he forms so large a part. Since,
superficially, it seems vital to the interest of
both of them to keep the process moving as
long as possible, the manufacturer is driven
to sell, by advertisement or otherwise, useless
or inferior and quickly worn-out articles where
he cannot make a handsome profit on durable
and well-finished production, the life and use-
fulness of which operate in the tmest sense
towards labour-saving.
Consider, then, the position at the present
time. It is certain that both employers and
employed are willing and able to work on
terms ; it is demonstrable without difiiculty
that the productive capacity of industry, with
its labour, plant and organisation, greatly
exceeds the consuming capacity of the nation,
unless that consuming capacity is enormously
and viciously inflated by waste, and especially
the culminating waste of war ; and yet it is
patent that the needs of the individuals who
comprise the community (whose collective
needs are the only reason and justification for
the existence of industry at aU) are far, and
even increasingly far, from being met. There
91
THE CONTROL AND
is one possible explanation for this anomaly —
the financial system, which ought to be an
effective distributive mechanism for the whole
possible production of society, is defective —
it does not so arrange the prices of articles
produced as to enable the extant purchasing
power to acquire them.
Now without, for the moment, discussing the
methods by which this defect can be remedied,
let us imagine the remedy to be applied and
consider its immediate effect on the unemploy-
ment problem. There are still millions of
persons wanting goods ; the productive system
can make these goods ; the persons who want
them can buy them, and those who make them
can be paid for them.
It seems obvious that an enormous stimu-
lation to production would be provided — a
stimulation which no mere propaganda on its
desirability has ever succeeded in evoking ;
and that the immediate effect of this would
be a radical diminution of unemployment.
Consider now the policy actually being
pursued at this moment by the Government
and the financial powers to deal with the
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DISTRIBUTION OF PRODUCTION
problem. They can be summarised in one
sentence — the reduction of costs, and more
especially labour costs. But labour costs are
wages and form by far the most important item
in the total purchasing power inside the country
available for the distribution of goods. Even
supposing that retail prices were reduced in
exact ratio to wage reductions, which is highly
improbable or even impossible, how is the
distribution of goods to people in this country,
which is the true object of British industry,
thereby advantaged ? As the prices fall by
this method, so the amount of money to
purchase also falls, and we are as badly off
as before, with the added complication of the
discontent evoked by the reduction of wages.
It would seem, then, that although a reduc-
tion of prices in relation to purchasing power
is not only vital in connection with the more
fundamental problems of industry and society,
but is the only effective method of dealing
with the immediate problem of unemployment,
we are not as a nation pursuing this policy, but
rather one which, if not diametrically opposed
to it, is yet wholly inapplicable to the situation.
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DISTRIBUTION OF PRODUCTION
Is it impossible to obtain adequate recognition
of fundamental remedies, and equally im-
possible to rouse the general public to a sense
of tbe catastrophe towards which its passivity
in the matter is hurrying it so swiftly ?
U
CHAPTEE IX
A COMMENTARY ON WORLD POLITICS (l)
Mr Balfour, in supporting the project of the
League of Nations, stated with great im-
pressiveness, and to an enthusiastic audience,
that the League must come ; there is no
alternative. Now Mr Balfour is a statesman ;
a little passe perhaps, but still a statesman as
distinct from a politician. It is highly prob-
able that we differ from him in nearly every
fundamental conception of what society ought
to be and could be, and in the means that can
profitably be employed to induce such changes
as are necessary. But we have no doubt
whatever that Mr Balfour has a personal code
from which he will not depart, and that in-
cluded in that code is a refusal to state clearly
and definitely as a fact that which he knows
or even suspects to be false. We emphasise
this point because it is necessary to a grasp of
the difficulties and dangers with which this
country in particular and the world in general
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THE CONTROL AND
is beset at this time. Mr Balfour, then, a
representative of the best type of the old-
fashioned statesman, puts forward a plea in
support of a project involving the most
tremendous consequences, and separating
Great Britain from every fundamental canon
of procedure not only of the past, but of the
** platform " on which the war was fought
(if we except empty phrases), and this course
is recommended to his hearers, not by any
reasoned or inductive process of argument or
demonstration, but by the council of despair
that, lacking any idea of the right thing to do,
we must do this. It would be incredible, if
it were not so clear that every statesman of
every country in the world has either suc-
cumbed to panic, or retreated behind a barrier
of phrases without concrete meaning or applica-
tion to the course of events. Stripped of its
verbiage and the mass of pious sentiment with
which it is surrounded, what is the League of
Nations, as projected on the basis of existing
social, political and economic systems ? Its
major premise is the avoidance of war, by the
settlement of disputes at a centraUsed head-
96
I
DISTRIBUTION OF PRODUCTION
quarters, backed ultimately by the logic of a
position which centralises the final argument
of force under an elected committee, operating
by means of permanent officials. The first
permanent officials have been appointed, and
may broadly be said to represent the Ultra-
montane, or Temporal Power, section of Roman
Catholic politics (said to be the only barrier
between Europe and "anarchy"), by accom-
modation and in accordance with at least one
section of High Finance. Consider this pro-
position, stripped of its sentiment, in the light
of actual knowledge and observation of the
working of such an organisation (quite apart
from any question of personnel at all). The
Post Office, for instance, is such an organisa-
tion. It is in theory a Department ruled over
by a Political Minister responsible to an elected
body, the House of Commons. Does anyone
in their senses imagine that the Postmaster-
General could carry any point of internal policy
in the Post Office against the settled procedure
of the Permanent Officials ? Or that any attack
by an individual from inside the Post Office
on a system (as distinct from a person) which
G 97
THE CONTROL AND
may press hardly on him has any chance of
success ? But, it may be argued, we are going
to change all that. We are going to have
democratically elected committees to deal with
all such questions. Very well, let us consider
the actual working of such a committee. A
grievance comes before it and a decision is given
which may quite reasonably not give satis-
faction, and the committee is attacked for it.
It is an honest decision honestly given, and
the committee combines to resist the attack.
Immediately a position is created in which the
committee represents a vested interest, and
acts not as a body of elected representatives,
but as an Institution whose power must be
consolidated, and whose dignity must be up-
held. Anyone with practical knowledge of
committees knows that this is what happens.
It may be said that all this is simply an argu-
ment for anarchy (and it is the argument for
anarchy), but that is a mistaken view, as we
hope to show.
Having got it firmly fixed in our minds that
no conceivable change of heart has any bearing
on the results of the arrangement we are dis-
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DISTRIBUTION OF PRODUCTION
cussing (we should imagine that from top to
bottom, for instance, the Post Office is staffed
with average kindly human beings), it is clearly
vital to get some idea of where the difficulty
does lie, since no difficulty is finally insuper-
able ; and we have no hesitation in saying
that the difficulty lies in the common confu-
sion between organisation and administration.
Organisation is a pure, if at present empirical,
science ; its relation to administration is the
relation between the Theory of Structures and
the Strength of Materials. No personality
enters into sound principles of organisation at
all ; administration, on the other hand, which
is an art, is wholly concerned with the satis-
factory adjustment of individuality to organisa-
tion. The distinction is vital. Let us apply
it to the projected League of Nations, which is
first of all an organisation of some sort, and
an organisation presupposes some objective.
We have seen that the very core of the League of
Nations^ idea is power, final and absolute ; it is,
therefore, an organisation expressly designed
to eliminate administration by suppressing
individuality ; to make the Machine finally
99
THE CONTROL AND
supreme over the Man. And the alternative ?
Let us return to our corpus vile, the Post Office.
Imagine the Post Office to be organised
exactly as it is organised (though it is highly
probable that its organisation could be im-
proved). Its administration admittedly is bad,
for reasons, in our opinion, fundamentally un-
connected with personnel. Leaving, we say,
everything else exactly as it is for the moment,
let us suppose a Regulation to be added to the
few thousands which are now the chief exercise
for the ingenuity of its staff, to the effect that
all Post Office servants are at liberty to retire
at will on a pension equal to their full salary.
We admit that the traffic in St Martin's-le-
Grand would be congested for some time, but
supposing this initial period to have been sur-
mounted by a reasonably well thought-out
transition policy, we have no doubt whatever
that a staff would be found at work, having
realised that creative activity is a luxury, if
not a necessity, of existence. Our hypothetical
arbitration committees, however, are now con-
fronted with a new situation — they have to
find a solution of problems submitted to them
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DISTRIBUTION OF PRODUCTION
which will keep the complainant at work by
preference, if it is to the advantage of the Post
Office Service that he should he kept at work. If
he is a pure crank, the Post Office will be better
without him ; but if his ideas are sound —
i.e. in the general interest of all concerned — he
will be in a position both to defy economic
pressure and to apply collective interest to the
solution of his difficulties. The illustration is
crude, but it may serve. The conclusion of the
matter is that association for the attainment
of an objective inevitably becomes a tyranny
{i.e. an attack on individual initiative) unless
it can be broken at any time, without incurring
any penalty other than the loss of association
itself.
Before, therefore, the League of Nations can
be constituted as that League in the interest of
Free Persons, which it pretends to be, but is
not, we have to place the Machine at the dis-
posal of the Man. Given that essential, we
can design or alter the Machine with the single
object that it shall be the best Machine with
which to attain a result having the full approval
of the individuals without whose co-operation
101
THE CONTROL AND
it cannot work, and this will involve not one
organisation but many organisations in which
the relation of the individual to the organisa-
tion is not dissimilar to that of a man who is a
director of several and possibly widely differ-
ing companies. If he does not approve of them
he resigns, and if a sufficient number of persons
resign and are not replaced, then the activities
of that concern are clearly not desirable, and
it goes out of existence. Now the project at
present known as the League of Nations can
be seen to be the converse of all this ; if the
individual or the nation does not approve of
the objective of the League (which rests on a
purely abstract and improbable assumption
that its personnel not only represents the
highest wisdom but an unearthly disinterested-
ness), then that individual or that nation is
eliminated, so that in theory no effective will
remains save that which reaches its highest
expression in the apex of the perfect Pyramid
of Power, which is its object. We repeat,
therefore, that in this project is the greatest
and probably the final attempt to enslave the
world, an attempt which is exactly similar,
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DISTRIBUTION OF PRODUCTION
and probably proceeds from exactly the same
International source, as the attempt so recently
failed, in which the German people were tools,
blameworthy just to the extent that they
allowed themselves to become tools ; and we
believe that while it must finally fail, the
measure of the misery in which its trial would
plunge the world is such as to dwarf the
horrors of the years so recently endured. We
do not, therefore, agree with Mr Balfour, either
that the League of Nations must come, or that
there is no alternative to it, and we trust that
the community in whose hands may lie the
power will not be so blinded by the fine words
in which its description is enveloped as to miss
the meaning of the thing which is behind them.
The most important report, issued by the
United States Council of National Defence,
entitled An Analysis of the High Cost of
Living Problem, is a document (we are sorry
to say), as might be expected, incomparably
in advance of any similar official pronounce-
ment which has appeared in this country.
After pointing out that the problem is so inter-
related with others that its consideration opens
103
THE CONTROL AND
up the entire field of reconstruction, it goes on
to remark that it is neither a new problem nor
(under existing circumstances) transitory in
character. Proceeding, it explains, in an excel-
lently concise manner, the form of currency
inflation which is produced by the lavish dis-
tribution of money unrepresented by ultimate
products in personal demand (which is exactly
the situation our super-producers are striving
to foster, whether by ignorance or otherwise
is immaterial), and remarks " with dismay on
the general flood of misinformation, half com-
plete information and undiluted ignorance
which . . . pervades the land regarding our
current economic situation." We agree en-
tirely with all this, and while the conclusions
which the report draws as to the steps to be
taken to deal with the situation are not so
impressive (quite possibly for reasons over
which the individuals who framed the report
had little control), there is none of the glib
claptrap about them which we are doomed
to suffer in similar circumstances in this
country. Compare all this with the solemn
pronouncements of our only Mr G. H. Roberts.
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DISTRIBUTION OF PRODUCTION
After admitting that food is, on the whole,
abundant, and that its alleged scarcity has
little to do with high prices (a piece of informa-
tion he might have derived from us about a
year ago), he admits sadly that "it is un-
doubtedly tme that at the present time the
increase in supply has not brought about the
decline that was expected by many ... in
fact prices, so far from declining, have re-
mained high, or shown some tendency to
increase."
After numbing his hearers with a mass of
statistics to prove that we ought to be thankful
that we are not worse off — most of which, when
exchange is considered, prove exactly that we
are worse off than our neighbours — he goes on
to make the original suggestion that the cure
is more production for export. Let us para-
phrase Mr Roberts, and explain him to himself,
as he clearly requires explaining. He admits
that there is a sufficiency of goods. He even
allows it to be gathered that supply is being
restricted by artificial means. He knows that
the world is complaining of high prices. He
knows, if he will keep quite quiet, and think
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THE CONTROL AND
for a few minutes, that prices ultimately
represent work, man-hours of labour. As a
remedy for a complaint that prices representing
work are too high, although he is being asked
to distribute goods which already exist in
sufficient quantity, he recommends more work,
much more work, to be applied to the making
of unspecified articles, in order to export the
result out of the community which has per-
formed that work. Mr Roberts concludes by
assuring the Conference that they may be
confident that the Ministry of Food is doing
everything in its power to keep down prices,
and that the power of the Government is
strictly limited in this respect.
We have no doubt Mr Roberts is entirely
honest in making these latter statements, and,
moreover, that, as distinct from his earlier
remarks, he is entirely correct. Both the
Ministry of Food and the ostensible Govern-
ment, as a whole, are mere tools in the hands
of the real Governments, and Mr Roberts has
probably found out by now, if he did not
suspect it when he accepted office, that he is
paid to do as he is told. If he really knew
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DISTRIBUTION OF PRODUCTION
anything about the cause of high prices, and
were determined to use his knowledge for the
benefit of the country, he would not remain in
office for ten days. But consider what he says.
The Government — i.e. the Ministers of the
Crown — represent in theory the collective
interest of the nation. They are always saying
so, so it must be true. Is there any collective
interest of the nation which is more immediate
and more vital than that of food prices ? If
the Government has no power over prices —
i.e. if knowing that there is a sufficiency of the
articles required, in existence, they cannot get
those articles distributed without making an
immense quantity of goods for other countries
which are not asking for them, and whose
population, in any event, these Ministers do
not represent, if, in other words, they cannot
affect or modify the most elementary functions
of society — then who can modify them ? And ,
if the real rulers of society are not in the
Government, but behind the Government, who
elected them, what interest do they represent,
and what is the good of, say, Mr Roberts ? We
feel sure that Mr Roberts is convinced that it
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DISTRIBUTION OF PRODUCTION
would be much better not to inquire too deeply
into these matters, but at the same time he
must recognise that he is certain to be asked
about them sooner or later. We suggest,
therefore, that the sooner the Hidden Govern-
ments of the world are brought out into the
open, and a decision is obtained on points
which really matter, the sooner we shall know
what sort of a New-World-for-heroes we are
likely to get. At the moment it requires
heroism for any but Cabinet Ministers to
live in it.
108
CHAPTER X
A COMMENTARY ON WORLD POLITICS (ll)
Readers of these pages who are also readers
of The Daily Telegraph will not have failed to
notice the columns in the issue of that estimable
journal signed by Sir Oswald StoU. He asks in
parenthesis, " Who can deny that we are on the
verge of a great financial and economic crisis ? "
and goes on to say, " Hundreds of enterprises
are held up by costs too high to admit of
sane capitalisation ! Thousands of enterprises
necessary to keep the economic wheel revolving
are on the brink of failure because they cannot
buy cheaply or sell dearly enough. ' ' (Our italics. )
After observing that " Financiers' finance,
with its checkmates by rival groups, is ruining
the country," and that " the aim of National
Finance should be some prosperity for all
Nationals, not all prosperity for some Inter-
nationals," he points out the solution "... a
true conception of National Finance and
National Credit." This is all very gratifying
to our prescience, if not to our humanitarian-
109
THE CONTROL AND
ism. We have been saying much the same
sort of thing publicly for four and a half years,
and we think it highly probable that the " sane
Labour leaders " who preside at Eccleston
Square and elsewhere will hear from the brainy
fellows who comprise their official and un-
official general staff that Sir Oswald Stoll is
in league with us, or vice versa. But they will,
if only on this occasion, be wrong — not only
has that happy consummation still to be
reached, but, in the meantime, while agreeing
absolutely with all the quotations cited above,
and many others which space forbids us to
include, we disagree totally with the conclusion
drawn from them — that " Production on the
great scale will save us." Now, some months
ago, there appeared in the pages of Credit
Power and Democracy this statement : "In
spite of the apparent lack of enthusiasm with
which any attempt to examine the subject of
credit and price control is apt to be received
in the immediate present, there is no doubt
whatever that its paramount importance will
within a very short time be recognised,
although perhaps not so quickly by British
110
DISTRIBUTION OF PRODUCTION
Labour as elsewhere. The real struggle is
going to take place not as to the necessity of
these controls, hut as to whether they shall he in
the hands of the producer or the consumer.'*
That is just exactly the point at which we join
issue with Sir Oswald StoU, and the super-
Productionists. The practical implication of
their policy is a continuous rise in the level of
prices of necessaries ; we look to a continuous
fall in such prices.
We believe it is no longer necessary to
labour the point that whoever controls credit
controls economic policy ; and it follows as a
simple syllogism that just to the extent that
control of food, clothes and housing is control
of society, so producer-control of credit means
the enslavement of society to Industrialism ;
whereas the whole world now rocks to its social
base in an efiort to subdue the dragon of the
industrial machine in order that men may be
free. Any housewife who ordered from her
tradesmen " as much as you can send me of
everything " would be deserving of, and would
receive, reprobation, even in a time of scarcity ;
but where the real capacity for supply is far in
111
THE CONTROL AND
excess of any real demand, sucli an individual
would be in danger of certification as insane.
The public is the housewife, and its business
is to order the right quantities of the right
things in the right order, and to see that it gets
them ; not simply " More." The productive
system is easily capable of giving the public
what it wants, if only producers can be salved
from the unlimited task of giving the public
what it doesn't want — e.g. " employment."
The existing financial system exists by seeing
that the public never gets quite enough of any
one thing it wants ; by constantly diverting
the productive organisation before it has time
to finish any one task ; or else " sabotaging "
the output ; and while we require for this
reason at the moment " more " of the funda-
mental necessaries of life, we do not require an
indefinite amount even of these. As has so
, often been emphasised in the foregoing pages,
; the whole problem fundamentally resolves it-
self into providing an organisation to get first
: things first, with the minimum of trouble to
everyone.
One of the vital means to that end is to throw
112
DISTRIBUTION OF PRODUCTION
overboard the superstition that " employ-
ment " is the inevitable condition antecedent
to " pay," and for this reason we welcome the
support given by the numerous local Trades
and Labour Councils to the resolution put
forward by the Minimum Income League
on the agenda of the Annual Labour Party
Conference recently held at Scarborough.
To students of the psychology alike of in-
dustrial and of world movements (which is,
in essence, identical) it requires an effort to
avoid cynicism at the similarity in the real
aims of orthodox Socialism and ultra-Capital-
ism. The idolater of the State says : "I will
make it impossible for you to live except you
conform to my standard of conduct." Lord
Leverhulme, amongst others, says very little,
but, being more capable, obtains world control
of essential products, and lays down a policy
both for his employees and those who must
have his goods. Bismarck understood the
situation perfectly when, in speaking of the
German Socialist Party, he observed : " We
march separately, but we conquer together."
The will-to-govern is identical in each case,
H 113
THE CONTROL AND
Against this essentially insolent tyranny, the
idea underlying, inter alia, the Minimum Income
proposal, is the only defence, and we therefore
congratulate its authors on the excellence of
their achievement in planting it in somewhat
difficult soil. But having said so much, we
are bound to point out the ineffectiveness of
the suggested mechanism, which is based on
the error, made in company with others such
as Professor Bowley, who, we think, ought to
know better, that the national income equals
the sum of the price-values of the national
production.
This would he true if all wages, salaries and
dividends charged to 'production were used, at
the instant they were earned, to buy the p-oduc-
tion in respect of which they are earned. But
they are not so used, and on this gap between
production and delivery, which the complexity
of modern co-operative production is widening,
a mass of credit purchasing power is erected
which never appears as income at all, and
which is completely ignored by such proposals
as that which we are considering. If A ordered
a house off B, and B, having built it, lived in
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DISTRIBUTION OF PRODUCTION
it for ten years and then insisted on charging
his rent to A in a lump-sum addition to the
price, A would probably complain ; but when
B put his overhead charges, the rent of his
control of production, into the price of bricks
for A's garage, A seems to regard it as an act
of God, or, alternatively, of the King's enemies.
Possibly he is right in both cases, but that
does not alter the fact that A is being asked to
pay, in prices, for something — viz. a period
of use-value, past, and therefore destroyed and
non-existent — of which the effective purchasing
power never was distributed either as wages,
salaries, or dividends — i.e. income — therefore
income will not buy it. What may remain is
the credit-value of this period of use, its
assistance to future production, which may
form a solid basis for a distribution of purchas-
ing power possibly much in excess of the use-
value charged in prices ; but A gets none of
this.
We admit the elusiveness of the argument ;
it is one of those conceptions which, like the
differential co-efficient in mathematics, to which
it has a strong family resemblance, comes
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THE CONTROL AND
suddenly rather than by intellectual explana-
tion. But it is, without any doubt whatever,
of the essence of the contract, and failing
provision to deal with it, we are bound to
agree with the dictum of an opponent of the
scheme in the correspondence columns of The
Times who characterised the proposal (to pool
20 per cent, of every income, dividing the pool
equally over the whole population) as being
the heaviest direct tax on the poor ever
invented. The Minimum Income League has
a great cause to fight for, and we are confident
that its progenitors, if they will concentrate
on the problem, can so modify their proposals
as to still further assist in gaining a great
victory ; and in any event we wish them luck.
The fundamental point at issue will be still
further brought into prominence by the next
move in the strategy of the hard-shell Capitalists,
which will be to concede unemployment main-
tenance to wage-earners in consideration of the
removal of all restrictions upon output and
the acceptance of payment by results — an
arrangement which really means the formation
of comprehensive low salary lists, plus a
116
d
DISTRIBUTION OF PRODUCTION
percentage commission on output. We are
not so mucli concerned to point out that this
arrangement makes men " slaves " to an
imposed industrial policy, because a large
number of human beings are slaves already
and quite a number of them like it ; but it is
quite certainly a most ingenious device to keep
them slaves, whether they like it or not, and
we are sorry to see that the Building Guilds,
which have been started in London as well as
in Manchester, do not seem to grasp that fact,
in their rather naive satisfaction at having
incorporated the same principle in their con-
stitution. The important point is not whether
John Pushemup, of Messrs Cubitts, for ex-
ample, builds houses or Mr James Articraft,
of the London Building Guild, builds them —
without knowing anything of the executive
capacity of either, we do not know which is
the right man for the job. But we do know
that it makes very little difference to the
result, after an initial short period, which
organisation makes the rales, if either of them
is in a position to lay down conditions to the
public as to the use of the houses after they
117
THE CONTROL AND
are built. That is exactly what this mainte-
nance pay idea amounts to — that we shall all
be nicely fed, watered, groomed and stabled
if we will leave policy to the productive
organisations ; and the pity of it all is that
it won't work.
Some years ago one of the largest State-
owned industrial organisations in this country
imported from a commercial firm the idea of
the suggestion box, into which any employee
of any grade from the highest to the lowest
was invited to place any proposal either for
the smoother and more efficient running of the
organisation or for improvement in the pro-
cesses of manufacture. An elected Committee
was set up to deal with the matter, and a fund,
for which a Government grant was obtained,
provided a source from which rewards, varying
from a few shillings to several hundred pounds,
could be paid. On the whole, the scheme was
a failure. During the first year of its life a
flood of suggestions, good, bad and indifferent,
from the Selection Committee's point of view,
were submitted, many of them were paid for
and some of them were acted upon. The
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DISTRIBUTION OF PRODUCTION
second year showed a great falling off both in
number and quality, and in subsequent years
a mere trickle of, in general, impracticable
proposals, usually emanating from new-comers,
was the only output, and what was probably
worse, the general run of workmen in the under-
taking openly derided the plan as a scheme to
" suck their brains." (This in a "Nationalised '*
undertaking !) As a consequence of consider-
able familiarity with this and similar devices,
we have no hesitation whatever in saying that
the main cause of failure was not inadequacy
of reward, or even dissatisfaction with the
decisions of the Selection Committee, although
both of these were alleged ; but was rather a
subconscious irritation at the complete im-
potence of the authors of the suggestions to
superintend the process of giving their ideas
a run. Now, each of these suggestions, where
they were original, betrayed nascent initiative,
and it is out of personal initiative that all
progress of any description must come. In
the case we have just instanced, it was possible
to watch the strangling of initiative taking
place ; and the explanation was also obvious—
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THE CONTROL AND
Tl
that the great mass of individuals will not risk
economic disaster — the loss of their job — for
the sake of an idea. But it is highly probable
that many most valuable additions to the
knowledge of industrial organisation and pro-
cesses were thereby lost to the community and
are daily so being lost ; and only the grant of
economic independence and the consequent
freeing of personal initiative will stop this
immensely important channel of social waste.
That estimable journal The Spectator recently
started a sort of symposium on the subject
of " the Jewish Peril," both the book which
has recently been published under that name
and the hypothetical thing itself. Most people
are no doubt familiar with the general legend,
if legend it be ; it was the core of the Dreyfus
case, which convulsed France some years ago,
and is constantly reappearing in the guise of
the Hidden Hand stories of various descriptions
which crop up at any time of national crisis.
It presupposes the existence of great secret
organisations bent on the acquisition of world-
empire and the overthrow of their " enemies,"
and directed by immensely wise men with all
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DISTRIBUTION OF PRODUCTION
the power which an almost superhuman know-
ledge of psychology can bestow. Such an
organisation would be capable of using Govern-
ments as its tools and the lives of men as the
raw material for the fashioning of its projects.
Like The Spectator, we have no means of know-
ing how much of this idea is pure moonshine,
or even whether the whole matter is a malignant
stimulus to anti-Semitism ; but, with that
journal, we can understand that it might have
some foundation in fact, and that, as it puts
the matter, we have a good many more Jews
in important positions in this country than we
deserve. And not only in this country, but
in every country, certain ideas which are the
gravest possible menace to humanity — ideas
which can be traced through the propaganda
of Collectivism to the idea of the Supreme,
impersonal State, to which every 'individual
must bow — seem to derive a good deal of their
most active, intelligent support from Jewish
sources, while at the same time a grim struggle
is proceeding in the great international financial
groups, many of which are purely Jewish, for
the acquisition of key positions from which to
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THE CONTROL AND
control tlie World-State when formed. We are
anxious not to be misunderstood. We do not
believe for a single instant that the average
British Jew would countenance such schemes
for a single moment, but in view of the curiously
circumstantial evidence which is put forward
to support such theories, and the immense
importance of the issues involved, we agree
that it is very much better that as much day-
light should be allowed to play on the matter
as may be necessary to clear it up. The
alternative will be an outbreak of popular fury
in which the innocent will suffer with the guilty,
if there be any such.
It is always difficult to know how much
weight to attach to Press expressions of public
opinion in the United States, and that difficulty
is greatly enhanced at this time both by the
immanence of the Presidential elections, and
the selective censorship which our own Press
exercises in its quotations. But there seems
no reason to doubt the general tnith of the
impression which is conveyed both by them
and by a perusal of the American political
reviews, that anti-British feeling is steadily
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DISTRIBUTION OF PRODUCTION
gaining ground, not only, and not even so much,
in the eastern cities such as New York, Boston
and Philadelphia, but in the Middle West and
on the Pacific coast. Because of the constant
flow of passenger traffic between Europe and
the Eastern States, and the consequent tend-
ency of European newspapers to quote Ameri-
can journals with which they are familiar, there
is an impression prevalent that the centre of
gravity of American action is resident along
the Atlantic seaboard. Such an idea is prob-
ably far more mistaken than to imagine, for
instance, that London opinion is British
opinion. All through the Middle West, in-
cluding such considerable cities as Chicago
and Milwaukee, there is an actual numerical
preponderance of people of definitely anti-
British extraction — Milwaukee, in particular,
is overwhelmingly German, while Chicago
is politically in the hands of Irish emigrants
largely of a generation having much greater
and more solid grounds for hatred of British
Governments than any which exist to-day.
This population has on the whole not done
well out of the war ; it is hit by high
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DISTRIBUTION OF PRODUCTION
prices, and irritated by all sorts of hindrances
to peaceful progress, ranging from Labour
troubles to a moribund railway system and a
negro problem. Such a soil is the perfect
matrix of an international hatred, and the
seed of such a hatred, already dormant, is
being cultivated with a skill and assiduity
which should command our attention, if not
our admiration. AH sorts of misrepresentation
both of fact and of policy, particularly in
respect of Ireland, Egypt and India, are
circulated with an utter disregard either of
essential truth or contingent circumstances.
On the Pacific Coast, where Japanese ex-
pansion is an obsession, our alliance with that
country is a special reason for dislike, and is
exploited to the utmost. This is not the place
to examine at length the motives behind the
persistent efforts to embitter the relations
between Great Britain and the North American
Republic — we have referred to some of them
in previous issues — but to anyone who realises,
as we do, the appalling horrors to which their
success must lead, the situation is one to excite
the gravest concern.
124
CHAPTER XI
A COMMENTARY ON WORLD POLITICS (ill)
Sir Oswald Stoll returns to his attack on
the system of credit-control by financial
groups, and although, as we said in a previous
comment, we are quite assured that the pro-
posals he adumbrates in his campaign are by
themselves worse than useless as a cure for the
present situation, we welcome the attention he
cannot fail to attract to the problem as a whole.
His text, in this case, is a quotation from a
speech by the Chancellor of the Exchequer, in
which the financiers are openly implored, as
the controllers of the situation, to conserve
" Capital " by which, from the context, it is
obvious that the Chancellor means credit.
It is a remarkable speech, and Sir Oswald is
probably correct in stating that never before
did a Chancellor of the Exchequer acknowledge
in set terms the absolute control of the Govern-
ment and the country by the financial com-
munity. Just think what it means. Two or
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THE CONTROL AND
three great groups of banks and issuing houses
controlled by men, in many cases alien, and
even anti-British alien, by birth and tradition,
international in their interests and quite
definitely anti-public in their policy, not
elected and not subject to dismissal, able to
set at naught the plans of governments ; pro-
ducing nothing, and yet controlling all pro-
duction. We do not believe that there is a
single considerable commercial organisation in
this country or America, however apparently
prosperous, which could live for two years
against the active hostility of half-a-dozen of
these men. To such. Ministers of the Crown
are servants appointed to take orders, and
dismissed if they are negligent in the execution
of them ; wars, famine and desolation are
simply mechanisms by the aid of which their
control is conserved. Consider the railway
systems of America : twenty years ago giving
promise of forming a model transportation
system ; to-day, looted, sacked and exhausted
by one financial raid after another, they are
almost in extremis, and only maintain a service
which is a mockery to technical capacity, by
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DISTRIBUTION OF PRODUCTION
means of a grant from the public purse of a
sum substantially equal to the original cost of
their construction. Every one of the groups
which were directly responsible for this result
is represented in the city of London, and is
included in the Chancellor's reference, just as
they are represented in Paris and Berlin, and
probably Moscow. Meanwhile, Dean Inge
deplores the failure of democracy, and the
Labour Party agrees that what we really want
is more production, and the building trade gets
on with building more — factories.
We have always held that in America, where
irresponsible financial control has been most
blatant, and the results of it, taking natural
resources into consideration, more obviously
disastrous than even in Europe, there would
come the first clear-cut and dangerous challenge
to the system ; and the modest little an-
nouncement which has crept into the London
Press that representatives of a new party
opposing the Democrats and Republicans
alike, and not in sympathy with the Socialists,
will meet at Chicago to nominate a Presidential
candidate, is, if we mistake not, a justification
127
THE CONTROL AND
of tliis opinion. The power behind this new
movement is a composite one, involving the
Non-Partisan League (which is definitely in
possession of the machinery of government in
North Dakota ; is said to control Minnesota,
and is steadily gainirg ground in several other
of the States of the Middle West), and a number
of the Labour unions, including the Railroad
Brotherhoods, who have revolted from the
leadership of the egregious Mr Samuel Gompers,
the latter individual undoubtedly one of the
most valuable assets the trusts possess. "With
these bodies are associated the Co-operative
movement, the Consumers' League, and several
quasi-religious organisations for social service,
the whole making up a body of opinion which,
if time permits, is definitely powerful enough
to carry the policy it represents — essentially
that of the public control of credit and price-
making — against any other single party of the
Republic.
Mr Gompers, who is no mean politician, and
is fully alive to the fact that his popularity is
waning, has himself raised the credit issue with
a demand for producer-contiol, coupling his
128
DISTRIBUTION OF PRODUCTION
platform with a political strategy which, con-
sists in urging his followers to support any
candidate, either Democrat or Republican,
who will pledge himself to assist in obtaining it,
thus forming, in intention, a coalition against
the new party of Economic Democracy. How
far American trade unionists will thus allow
themselves to be spoofed only time can tell,
but the result of this alignment should be a
matter of most absorbing interest, not only in
the United States, but in this country, for it is
not too much to say that the peace of the
world and the future of civilisation may be
involved in the outcome of the struggle.
A deputation from the League to Abolish
War, consisting, amongst others, of Mr G. N.
Barnes, M.P., and Mr Frank Hodges, of the
Miners' Federation, waited on the Prime
Minister in June 1920 for the purpose of
urging upon him the necessity of an Inter-
national Police Force to do the bidding of
the League of Nations. It is, at first sight,
a little difficult to understand the mentality
of Labour representatives who, while professing
to be profoundly dissatisfied with the existirg
1 129
THE CONTROL AND
state of society, and constantly concerned to
accuse the Governments of all countries out-
side, perhaps, Russia, of acting in the interests
of the Capitalist system which they condemn
(an accusation which is probably justified),
and of using the police and other armed forces
for the purpose of buttressing their power,
yet propose to set up a mechanism expressly
designed to make revolt against such Govern-
ment impossible.
We are not, for the moment, criticising the
proposal itself ; we are merely considering
the support of it by official representatives
of a party openly pledged to revolutionise
society. Now, assuming, as we are quite
willing to assume, that both Mr Barnes and
Mr Hodges are perfectly honest both in their
desire for a better state of society and for the
abolition of war, and that not being merely
irresponsible lunatics, they have some reasons
for figuring on such a deputation, it becomes
of interest to see how they reconcile the fact
that revolutionary Labour is notoriously
unable to capture existing police forces, with
a desire to build up a police force which is
130
DISTRIBUTION OF PRODUCTION
ex hypothesi incorruptible. We believe the
reason to be twofold. In the first place, Mr
Barnes and Mr Hodges no doubt believe that
they represent a Labour Party which is coming
into political power all the world over, and
that therefore they will control this police
force ; and secondly, they confuse a remedial,
if appalling, symptom, war, for the disease
which causes it, much as one might ignorantly
say that spots on the skin constitute measles.
Both of these reasons are demonstrably
unsound ; we will endeavour to show why.
A modern Trade Union represents, not a body
of individuals, but a monopoly more or less
complete of an essential factor in production —
i.e. Labour — differing in no respect in prin-
ciple from a trust monopoly of, say, sugar, and
Mr Barnes and Mr Hodges, in so far as they
represent or have represented trade unions,
represent this functional monopoly just as
truly as the chairman or secretary of the sugar
trust represents a sugar monopoly, and the
object of both is identical — viz. to exploit the
public, the consumer. There is not anyone else
to exploit; the employer is utterly incapable
131
THE CONTROL AND
of carrying a 25 per cent, rise in wages for
a month if lie does not recover it from the
public, and, conversely, will joyously grant any
percentage of wage increase if he is assured
that prices will recoup him. The party, if
it can be so called, which is undoubtedly
coming into power in the next few years all
over the world, therefore, is not the " Labour "
Party which Mr Barnes and Mr Hodges repre-
sent, but a Public Party which will replace ex-
ploitation by co-operation and in consequence
will deal just as faithfully with the abuse of a
" Labour " monopoly as with any other trust,
and which will represent the men and women
who now form the constituents of the Labour
Party, not as monopolists of a commodity, but
as human beings anxious to gain their legitimate
ends by the most convenient and comfortable
methods. In an economic system constituted
as is ours to-day, we do not in the very least
blame any monopolists, organised Labour in-
cluded, for exploiting their advantage to the
utmost : that is the way the game is played,
and that is the sure and certain method which
will break up society as we know it, though it
132
DISTRIBUTION OF PRODUCTION
contains no promise of constructing a system
to replace the ruins. But nothing is gained by
idealising the process ; and the Labour Party
and its ofl&cials are just as much a part of the
capitalistic system as, say, the Federation of
British Industries, and qua their representa-
tion of a monopoly, just as pernicious.
The second misconception, while one may
have every sympathy with it, is none the less
fatal to any effective remedial action. War,
appalling orgy of waste and misery as every
sane person must admit it to be, is not the
greatest of all evils, although it may quite
conceivably be a great enough evil to destroy
this civilisation. A greater evil would be the
unchecked operation in a helpless world of
those causes of which war is an effect. That
is exactly where what is commonly called
pacifism makes its cardinal error — it is so
concerned with the " rash " on the patient
that it will go to any length to suppress it.
Not that way lies a cure. The disease lies
much deeper than the skin — is concerned with
the vital processes of the body politic ; and to
avoid substituting a more lingering horror for
133
THE CONTROL AND
the sharp fever of war, it is necessary to restore
these vital processes to health and balanced
functioning. Now although we have insisted
that the financial organism is the region
demanding the most instant attention, it is
not the whole of the problem, although the
successful reconstruction of it would probably
render easy the solution of the remainder.
That lust for domination which may perhaps
be said to lie at the root of the major evils
of anti-public finance also operates, by the
substitution of the motive of fear for the
motive of gain, through the mechanism of
bureaucracy. The business man assists in an
unsound policy through the lure of reward
and through cupidity — the bureaucrat winks
at intrigue because of a fear, born of experi-
ence, that his knuckles will be severely rapped
if he doesn't. Merely to substitute cupidity
(which, after all, as its name suggests, is only
perverted affection) by fear would be a sorry
exchange. The problem is essentially a practi-
cal one, and we have no doubt whatever that
the real inceptors of the deputation to which
we refer (and who we feel positive do not
134
DISTRIBUTION OF PRODUCTION
comprise either Mr Barnes or Mr Frank
Hodges) are actuated by motives which,
whatever else they may not be, are almost
luridly practical.
The proposition which has been aired dur-
ing 1920 to increase railway rates another
40 per cent., making 90 per cent, permanent
increase over pre-war rates, raises, in an in-
teresting form, the question of the applicability
to this particular case of what is known as the
law of diminishing return. It is probably
quite familiar to readers of these pages — it
postulates that there is a certain maximum
" load " which any mechanism, economic or
otherwise, will carry : below and above this
load the output drops away, finally reaching
minima. Now it has long been an axiom with )
railway managers that it was impossible to
base railway rates on cost ; the only principle
on which a railway system as a whole could be
made to pay was to charge each separate class
of trajfic " what it would bear " — i.e. the most ,
it would pay without revolt. The rich industry '
thus subsidised the less prosperous and the
railway averaged their prosperity. This
135
THE CONTROL AND
system had reached perfection before the war,
and it is quite probable that in this country
5 per cent, increase in any one rate would
have raised a storm. It is now proposed that
rates shall rise not 5 per cent, but 90 per cent.,
and that at a time when there are not want-
ing interested persons (with whom we totally
disagree) who would contend that the day of
the railway is done and that road transport
and aviation will carry the traffic of the
immediate future. We say we disagree with
such persons ; but we do not mean by that
to suggest that it is not possible by means of
crazy finance to ruin a magnificent asset, in
order that a few international credit-mongers
may acquire control of national transport.
The bearing on this of the law to which we
refer will be plain : if the rates on British
railways before the war were as high as could
be borne, and they were, then any further rise
means a decreasing return and the speedy
bankruptcy of the whole railway system due
to the use of alternative, though not funda-
mentally better, means of transport.
Just as it is quite erroneously said that
136
DISTRIBUTION OF PRODUCTION
threatened men live long, so there is a tendency
as perverse as it is general to assume that it
is only necessary to predict disaster of any
description to form thereby a solid basis for
optimism. For twenty years hundreds of
men and women in this country, and thousands
on the European continent, knew that, given
the continuance of certain economic and
political factors, war with Germany was just
as inevitable as a chemical reaction. Certain
social factors combined will produce certain
social results, just as certainly as the com-
bination by the aid of a spark of a mixture
of oxygen and hydrogen will result in water.
In 1900 the writer was told by an official
of the German Foreign Office that there was
not room in the world for a powerful Britain
and a progressive Germany, and the reasons
given, which required the major portion
of a long and dull sea voyage for their dis-
cussion, were quite conclusive if the premises
of the financial system were admitted. In
spite of the organised efforts of Lord Roberts
and others to drive the facts of the situation
home to those persons most vitally affected,
137
THE CONTROL AND
the members of the British public, it is quite
certain that not 5 per cent, of the population
of these islands regarded the question as any-
thing but a political " stunt " run by a mixture
of interested scaremongers and cranks with
bees in their bonnets. Viewing the situation
dispassionately in the light of events, it seems
probable that the control of the organs of
public information, and the general psychol-
ogy of the peoples who were to be the victims
of the coming disaster, were already so grouped
as to make the late war, humanly speaking,
inevitable ; that any radical preventive pro-
paganda, to have a reasonable prospect of
success, must have been launched not much
later than 1875, and must have taken effective
steps, amongst other things, to deal with the
capture and syndication of the public Press
which marked the closing years of the nine-
teenth century. But the situation in regard
to the disasters which threaten us now is
profoundly altered, and we believe that it is a
practical proposition to expect to bring such
forces to bear on the situation as will suffice
to avoid at any rate the full force of the blow
which might otherwise destroy us. Amongst
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DISTRIBUTION OF PRODUCTION
the differences on which legitimate optimism
may be based is the increasing cynicism,
common in every rank of society, in regard
to the expression of beautiful sentiments un-
supported by a live practical policy amenable
to all the checks men apply to everyday affairs.
The sob-stuff is losing its grip. By their fruits
ye shall know them. Perhaps in some queer,
perverted way President Wilson was indeed
the saviour of the world, as he is said to have
believed himself to be, when he heralded the
entry of the United States into world politics
by a series of speeches couched in the most
silver eloquence, and embodying sentiments
calculated to take the thoughts of men clean
away from the facts of life ; and then, in
company with his fellow-conjurers, hatched
out a treaty and a League of Nations expressly
designed to reduce every one of these beautiful
sentiments to a grinning mockery. " Open
covenants openly arrived at " ; Mr Lloyd
George goes down to Lympne to discuss
policy with Sir Philip Sassoon prior to
reshuffling the destinies of peoples with
M. Millerand; "self-determination" — and
admittedly the ordinary everyday liberty of
139
THE CONTROL AND
the subject fell during Mr Wilson's adminis-
tration of the United States Government
to a lower level than that of Russia under
the Tsar. The practical effect of this dis-
illusionment is seen daily in operation ; not
so very long ago a rhetorical appeal for backing
for the anti-Bolshevists was met by an un-
mistakably dry negative even from quarters
which have no love for Lenin and Trotsky ;
the somewhat New-Jerusalemic tone of The
Daily Herald is barely offset in its effect on
its popularity by the realistic and detailed
descriptions of the current prize-fights which
form a feature of its otherwise pacifist pages.
The general result of all this is to make it
increasingly difficult to sweep a nation off its
feet by a mere gust of emotion, and even if the
change has not yet proceeded very far it is a
most hopeful sign that it has begun.
The Food Controller's monthly report issued
in June 1920 ^ showing a further serious rise
in the price of food since January, was a
^ This paragraph was written in June 1920, and is
included for the purpose of showing the development
(which took place almost exactly according to plan)
of Financial Strategy.
140
DISTRIBUTION OF PRODUCTION
grim comment on the attempt made to
inaugurate what the French have christened
la vague de haisse, by the simple process of
saying that it has arrived. So far from a wave
of falling prices having reached either us or
them, the level of prices steadily rose, and
reached in this country 265 per cent, of
the prices ruling for foodstuffs in July 1914,
and there is every prospect that, with a possible
temporary decline, it will continue to rise. The
real cause can be stated in half-a-dozen words
— the breakdown of credit ; the disbelief in
the reality of " money " as a good exchange
for either goods or services ; and there is
nothing in the line being taken either by the
Government or the large industrial combines;
to show that they have either the will or the j
understanding necessary to close the rapidly j
widening gap between financial credit and real
credit. It is now being allowed to transpire
that the big manufacturers of the Midlands and
the North are finding the way very hard in-
deed, their costs are such as to make their prices
definitely non-commercial ; and dark hints of
the necessity of shutting down their plants for
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DISTRIBUTION OF PRODUCTION
the purpose of bringing labour to its senses — i.e.
starving it into submission — are appearing in
the columns of the Press. It is of course an
open secret that this latter plan was concocted
and agreed to by a ring of manufacturers in
1917 as being the inevitable result of con-
cessions extracted from them during the war,
but it was intended that it should be put into
operation much earlier, and we very much
doubt whether it may not now have results
quite other than those expected by its in-
ventors. What about the necessity for greater
production ~SLS^a, cure for all evils ? Surely
if it is only production per se that we want
it is very reprehensible for the employer to
consider for a single instant a policy which is
not merely designed to limit production, but
to stop it completely, when for so long we
have been told that only greater production
will save us. Can it be possible that the only
production it is desired to increase is the pro-
duction of money, and that if more money can
be produced by making less goods we shall get
less goods ? The next few months should
furnish an answer to that question.
142
CHAPTER XII
A COMMENTARY ON WORLD POLITICS (iv)
If Macaulay's New Zealander, after musing
on the more material remains of our social
system as exemplified in the Houses of Parlia-
ment and the secretariats of Whitehall, should
be driven to investigate the concepts of
national organisation symbolised by them, it
is fairly certain that nothing will astonish him
more than the evidences he will find on every
hand of the persistent and touching faith of
this queer old people in what they call " repre-
sentation." He will find that this curious
superstition (dating back to the earliest days
of their history, when priests made a corner
in deals with God and the dispensing of
personal salvation became a close trust) per-
sisted on even through the First World War
when millions of persons who disliked war and
held it in contempt as a moral and material
anachronism allowed their representatives not
merely to lead them into a war which had
143
THE CONTROL AND
become inevitable but, almost without a
protest, to throw away any poor consolation
which might be derived from a real " war to
end war." He would note that at irregular
and inappropriate intervals queer ceremonies
called elections took place at which persons
for the most part personally unknown to the
electors were " returned " for the ostensible
purpose of carrying out " reforms " which
most of the electors neither understood nor
cared about one fig. And he would further
observe that these elected ones, once safely
through the ceremony, at once became very
superior persons, full of dignity and im-
portance, and for the most part concerned with
very intricate relations between the State and
Borioboola-Gha. It seemed clear that these
same electors never derived any benefit from
these negotiations, or in fact and on the whole
from more than the very minutest fraction of
the activities of their representatives, while
further it was quite plain that a small number
of very opulent gentry of international sym-
pathies, who were not elected, and represented
no one but themselves, did in fact sway the
144
I
DISTRIBUTION OF PRODUCTION
whole deliberations of the elected assembly.
Still this touching faith that some day they
would elect the right men and all would be
well seemed to sustain the people through a
series of disappointments which would have
daunted a less stubborn race. The New
Zealander, who we must suppose to be an
intelligent man, would, we think, conclude
that this was a matter outside logic and
reason, and only comparable to collective
hypnotism. And he would be right.
In certain things this country in particular
is under a spell. At the time of the Armistice
there was not only not an unemployed man
in this country, but there was hardly an un-
employed woman or child over fourteen and
under eighty. The wheat cultivation was
increasing at a rate unknown for generations,
shipbuilding was proceeding at such a rate
that the destruction of war has been more than
made good in two years, manufacturers were
becoming rich, workmen were becoming manu-
facturers. Even the despised professional
classes were for the most part able to eke out
a precarious existence in either the fighting
K 145
THE CONTROL AND
services, or if age or health precluded that,
in ministering to the wants or patching the
digestions of those who did well out of — a long
way out of — the war. Production, which
Mr Clynes will tell us is all we need to make
us prosperous, reached heights far in excess
of anything ever touched in history, even out-
stripping such destruction as Dante never
dreamed of. Then peace, with the wings of a
dove, burst upon us. Hardly had the last
stretcher-case reached a casualty clearing
station in a grim and haunted silence than a
bleat of real anguish rose from these sheltered
shores — not from the battered wrecks in
hospital blue, the sad-eyed women in black,
or even from the new poor, but from Lord
Inchcape and other bankers. We were a poor
nation — no homes for heroes for us. Perhaps,
if we all worked harder than ever, and lived
the simple life for twenty years or so, we might
aspire to a few Nissen huts. As a preliminary
to all of us working harder prices rose 50 per
cent., and the unemployment figures rose from
nil to the present figure of about three million.
But further than that, the earnings, as apart
146
DISTRIBUTION OF PRODUCTION
from the wage rates of those still employed,
fell also. On every hoarding may be seen
auctioneers' advertisements of eligible modern
factories equipped with the finest tools to be
sold at break-up prices, and manufacturers are
beginning to compete with generals for eligible
if undistinguished posts under the Holborn
Borough Council. It is hardly to be wondered
at that our warnings of a greater and more
terrible war leave numbers of persons very cold,
since only destruction on the largest scale, it
seems to them, can provide a decent living for
the survivors. Side by side with these hap-
penings, which are plain for all to see, it cannot
have escaped notice that every bank composing
the charmed Circle of Five has pulled down its
barns to build larger. The London City and
Midland, to take one instance only, now has
fifteen hundred branches, of which, at a guess,
at least one half have been opened since 1914
in buildings of a solid magnificence appropriate
to the temples of a great faith. Perhaps one
of our readers with a taste for statistics will
compile a table showing the percentage of
corner sites occupied by banks as compared
147
THE CONTROL AND
with those occupied by other undertakings.
Has anyone durirg this time of industrial de-
pression and labour distress noticed any bank
premises for sale ? Is there any possible room
for doubt, not merely who did best out of the
war, but is doing well out of the peace ?
It might be noted from his article in The
Daily Herald of 24th March 1921, entitled "The
Coal Crisis and the Nation's Credit," that Mr
Frank Hodges " has been propounding up and
down the country a scheme which is the only
internal scheme calculated to help the mining
industry out of its difficulties and consequently
other industries out of theirs." We wish Mr
Hodges every success in his efforts, which aim
at the use of national credit to enable coal to
be sold below the cost of production, and we
would offer him every assistance, technical
and otherwise, to enable him to carry properly
designed proposals of this character to a
successful issue. His article in The Daily
Herald was, we think, admirable for the
purpose for which it was intended, but we
would suggest to him that a combination of
his propaganda with a new and more effective
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DISTRIBUTION OF PRODUCTION
form of " Direct Action " would be very-
desirable at this time. He suggests that
" the British Government " should either
propose something better or put his scheme
to the test of practice. We can assure Mr
Hodges that the British Government, or that
essential part of it which counts in matters of
this sort, has no intention or desire to propose
anything better — on the contrary, it has said
in so many words that it is unalterably opposed
to any proposition which involves the granting
of a subsidy, and it is prepared to go to any
amount of trouble and expense to prevent
Mr Hodges making clear to any considerable
number of persons how this proposal differs
from one involving a subsidy. But if Mr
Hodges will abandon the idea, so natural to
ingenuous minds — we have had it ourselves —
that the Government is struggling with a
problem it does not understand and cannot
solve, and ceasing his endeavours to enlighten
it, will use the position entrusted to him
to assist his constituents to dispense with
Government acquiescence with his plan (and,
of course, he must know that that is possible)
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THE CONTROL AND
we feel sure that he will be astonished at the
quickened apprehension of Westminster.
At the time of writing (1921) the miners'
strike or lock-out, whichever it should be termed,
has commenced, and according to the popular
Press a number of pits are already irretrievably
flooded. Lest the public should be in any
doubt as to who pays for these little wrangles
between the Coal Trust and the Labour Trust,
the price of coal has been put up Is. per ton
at once just to " larn us to be a twoad." Our
sympathies as between the two combatants
are wholly with the Labour tnist, because it
contains more human beings, but they are a
good deal more with the public than with
either party, and we think we are not alone in
the matter. It is quite time, we think, that
the great trade unions should understand
that the plea of the under dog, fighting against
unfair odds of education and resources and
injuring the bystander only because engaged
in a life-and-death struggle, will not wash.
The resources of, say, the Triple Alliance, are
ample to put them in possession of every
weapon in the hands of their antagonists —
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DISTRIBUTION OF PRODUCTION
are, in fact, potentially far superior ; and the
fact that they are quite obviously incapable
of striking a blow which the vile body of
the public does not receive instead of the
" Capitalists," at whom it is aimed, might
quite reasonably, and will, be adduced as a
good sound reason that they are a public
nuisance. That would be a superficial judg-
ment, but we do suggest that clumsiness and
ineptitude are now as inexcusable as real vice,
and that the great causes of which the Trade
Union and Labour movement claims to be
the protagonist, and of which it is, in fact,
the natural champion, should not be allowed
much longer to be so compromised by mis-
management as has most unquestionably been
the case during the past three years. We have
said elsewhere that the British Labour Party
in particular had an opportunity during the
years 1914-1918 such as probably never before
presented itself to any political party. That
opportunity was missed thoroughly and com-
pletely, and the credit and power of the
Labour Party is so damaged that it is quite
possible that it may never recover. " The
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DISTRIBUTION OF PRODUCTION
moving finger writes, and having writ moves
on," and not often, if ever, is a second innings
vouchsafed to any side in a game of this
magnitude. We see only one hope for the
Labour Party ; that it may, by a miraculous
uprush of leadership, renounce its absurd
arrogance of all the virtues, and by truly
representing the community, rather than a
mere sectional interest, draw again to its aid-
all those men of good-will in whatever station
they may be found whose good offices it now
seems so anxious to repel. If it will not do
this, and do it soon, it will sink to the im-
portance of the British Bolshevik Party, which
is negligible except as a useful bogey, by the
aid of which Mr Lloyd George can frighten
old women of both sexes into voting for the
Sassoon-Cassel-Zaharofi coalition.
152
CHAPTEK XIII
A COMMENTARY ON WORLD POLITICS (v)
If anyone is disposed to doubt our native
genius for organisation we would direct his
attention to the team-work of the Press
on the subject of Mr Frank Hodges' timid
suggestion of a credit appropriation for
the solution of the coal difficulty. In many
keys, yet in perfect harmony, a shriek of
horror has risen from organs professing all
shades of political opinion yet united by the
approach of a common danger to their financial
masters. It is true that most of them, as
newspapers, have no more knowledge of the
processes of finance than is necessary to enable
them to draw or cash a cheque, but, aided by
some mysterious sense, none of them has failed
to translate the proposal by exactly the same
word " Subsidy." And the concern of them
for the poor taxpayer ! Was there ever any-
thing so touching ? Happy the nation which
has a Press so active and sensitive to the
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THE CONTROL AND
interests of its constituents. But there is
more still to be done, and, without for the
moment quibbling over the confusion involved
in the misuse of words, we would direct the
attention of Fleet Street to the great activity-
supported from Downing Street and the city
which is taking place in regard to various
schemes for Export " Subsidies," such as the
Ter Meulen and Sir Edward Mountain pro-
posals. Mr Hodges admits that a sum of
£100,000,000 might be required for his pur-
poses, but it is hardly denied that this sum
would be represented by an increased dis-
tribution of coal in this country, since the
increased purchasing power would not be
reflected in an increased price for coal. That
is to say, the " subsidy " would be repre-
sented by goods in this country. But the
various Export " Subsidy " schemes con-
template the use of sums at least five times
as large as that for which Mr Hodges is asking,
and still taking Fleet Street's word that a
subsidy and a credit are the same thing, the
distracted British tax-payer would be fleeced
to ten times the extent to which Mr Hodges
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DISTRIBUTION OF PRODUCTION
would subject him ; he would not only have,
ex hypothesi, to find five hundred millions in
taxation, but would be mulcted by a rise in
the general level of prices due to the distribu-
tion of five hundred millions of money un-
represented by any increase of goods in this
country. May we hope that, the point
having been indicated, Sir Edward Moun-
tain's Export Subsidy Scheme will now
receive the same candid and uniform treat-
ment as that accorded to poor Mr
Hodges ?
Where Mr Hodges and the miners fail in
strategy is that they do not seem to realise
the fundamental weakness of their case as
miners, and the immense strength of it as
members of the public. We thoroughly recog-
nise that the very worst and blackest aspect
is put on their demands, but the elementary
fact is that even as put by themselves there is
nothing about them to compensate the public
at large for the expense and inconvenience to
which it is put by a strike. Outside the war
profiteers, who, after all, are the merest tithe
of the population and are congenita lly selfish,
155
THE CONTROL AND
there are very few classes in this country who
are not far worse oS financially than they were
in 1914, and the classes who have lost most are
those who, while saying least, think the more
and exercise by far the most vital influence on
affairs in a time of crisis. If instead of con-
tinually trumpeting their determination to
raise their own standard of living, no matter
who suffers in the process, the Triple Alliance
would say, " We intend that the general
standard of living in this country shall rise,
and we mean to proceed, not by attacking
anyone, but by assisting everyone — by first
demanding a conference of all parties for the
purpose of exploring every avenue which might
lead to lowering the cost of living without
lowering the income of anyone," they would
be invincible and would carry their own ends
by a side wind. No altruism is required or is
desirable — if every rich man in this country
sold all that he hath and gave to the poor,
the poor would only notice it for about three
months, and after that would, under the con-
ditions which the Labour movement has not
so far challenged, starve to death through
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DISTRIBUTION OF PRODUCTION
unemployment and tte failure of production,
just as happened in Russia. As it is, a con-
viction is hardening in the country that, bad
as things are, they would be simply intolerable
if the Labour Party ever got into power. That
psychology is disastrous, and when over some
such issue as the present the Prime Minister
decides to appeal to the country, it will result
in his being returned with a majority which
will be acclaimed as a mandate to put Labour
exactly where Sir Alfred Mond and his con-
freres wish to see it.
Mr Hughes' note to the Allied Powers, which
may be considered as the first official pro-
nouncement on Foreign Policy issued by the
Harding Administration, is a sufficiently dis-
quieting document. In the details of its
comments on the Yap controversy and its
demand for a share in the loot of Mesopotamia
there is, of course, nothing new. The note-
worthy content of the dispatch is the considered
enunciation of a new Monroe doctrine em-
bracing the whole world, and the intimation in
effect that the other World Powers have been
wasting their time in disposing (so far as they
157
THE CONTROL AND
have disposed) of the problems contingent on
the Peace Treaty — that nothing can be done
without the acquiescence of the United States,
and that as the United States has not acquiesced
in what has been done, it is all null and void.
Passing over the nice judicial point as to
whether a nation which has been invited and
has refused to take part in the deliberations
which have led to the allotment of mandates
and other little spoils of war is justified in
objecting to the results when they are a more
or less accomplished fact (because the only
real sanction behind such an attitude is the
will and the power to impose acceptance of it
by force of arms), we may profitably consider
exactly what is the position created by such a
claim. If Washington is alone in making it,
it is clear that the United States is claiming
the position of the super-State, the ultimate
arbiter of all things mundane. But if, on the
other hand, she is only claiming a right which
she is prepared to allow to others, then once
again we are brought up against the question
of sanctions. Suppose Montenegro should ob-
ject to the future course of events in Mexico ?
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DISTRIBUTION OF PRODUCTION
Will Washington agree that all action in
Mexico must be held up until Montenegro is
placated ? It requires some optimism to
believe it.
The curious point about the old Monroe
doctrine, which is not without interest in con-
sidering the new variant, is that probably
more than anything else it has consistently
handicapped the United States in her relations
with South America to which it chiefly referred.
While not above invoking it when occasion
served, the peoples of the Latin republics
derided it in conversation as a piece of
unsolicited impertinence, and visited their
resentment on the head of the unfortunate
" Norte Americano," both by trade discrimina-
tion against him and by direct personal dislike,
with the result that, at any rate prior to 1914,
he was easily the most unpopular national south
of Panama. In itself there is, of course, no
doubt that the Monroe doctrine was in the
best interests of South America, and in-
cidentally of this country, which always con-
sistently supported it, but it is, nevertheless,
incontestable that things being as they are,
159
THE CONTROL AND
it was one of the ulterior forces concerned in
the late war. Germany had acquired pre-
dominating commercial interests in Brazil,
and only the Monroe doctrine and the British
fleet stood between her and the annexation
of a dominion larger than the United States
and rich beyond the dreams of avarice — a
country only held back by the incompetence
and laziness of the Portuguese settlers. Pre-
sumably, although we have no information
on the point, German interests in Brazil have
suffered eclipse ; it is certain that the United
States have been making the most strenuous
efforts to replace her not only in Brazil, but
in the Argentine, where she was obtaining large
financial power through her banking system ;
but the resentment of overlordship excited
by the rather crude tactics of Washington is
so strong that we may hazard a guess that
our exporters are not doing very badly.
When a man is entirely destitute of know-
ledge and ideas in regard to the industrial
situation, one of two pronouncements may
safely be expected of him in regard to it. If
he is of the traditional type of beef-eating
160
i
DISTRIBUTION OF PRODUCTION
Briton chiefly met with in country districts,
who will endure anything if only he is not asked
to think, he will probably bark out " Labour ?
D d scoundrels ! put 'em up against a
wall and shoot 'em ! " No one with a sense
of humour ought to dislike this hearty ruffian,
even if driven by uncontrollable impulse to
throw a bucket of water over him. In the first
place, he is no more responsible for his opinion
than a terrier howling at Beethoven, and in
the second place, however silly his method, his
instinct is healthy — he wants a solution. The
other person is in a different and, to us, much
more contemptible category — he feels sure
that all would be well if " both sides " would
only show a little good-will. This man may
not know it, but he is blasphemous. One of
the most amazing features of the present
situation is the steady bias towards good-will
and reason met with everywhere — the preva-
lence of a subconscious feeling that an effort
is being made to get honest men to fall out
in order that thieves may break through and
steal. It is particularly noticeable on the
railways, where every grade seems anxious to
L 161
THE CONTROL AND
discount the inconvenience it anticipates being
forced to inflict on the public. The writer has
been privileged to address various meetings
up and down the country on Credit Reform
proposals, at most of which have been present
one or two unhappy-looking individuals whose
ideals evidently did not agree with their
digestions, or, perhaps, proceeded from them ;
but no one could mistake the isolation of their
position. Most of these audiences either of
so-called " masters " or " men " consisted of
individuals actually grappling with the facts
of industry, knowing the virtues, failings and
common humanity of their neighbours, and
well disposed to agree that a third party,
Finance, understood by neither of them, might
be the agency which for ever seemed to make
agreement impossible. That there are small
bodies of irreconcilables we agree ; but if
the main body of citizens had a sound lead
we do not think that these warriors would
count for very much.
There may be various opinions about Mr
Lloyd George (known for obvious reasons, in
political circles, as " The Goat ") as a Prime
162
DISTRIBUTION OF PRODUCTION
Minister, but it is impossible to deny him the
very highest honours both as a strategist and
as a political acrobat. His method of testing
the electioneering temperature by calling out
the reserves and imploring all loyal citizens to
enlist in the Volunteer Defence Force during
the late coal strike is very expensive to the
tax-payer and very bad for the moral of the
country, but gives him quite a fair idea of
the votes he would get in the election he
is doubtless considering. Having tested the
temper of the country in this way, we may
confidently expect him to go to the country
at an early date and be returned to power
with a substantial, even if slightly dimin-
ished, majority. In the unlikely event of
his deciding that an election would be in-
opportune he will no doubt pose as the
saviour of the country from the civil war we
haven't noticed. Either way, it all seems
clear gain to Mr Lloyd George, and it is very,
very clever. "Whether a little wisdom would not
be worth more to the country, and to Mr Lloyd
George himself, than all this agility is, of course,
a matter on which one may hold strong opinions.
163
THE CONTROL AND
It has always been incompreliensible to us
that anyone could imagine that a body of men
of the magnitude of, say, the Triple Alliance,
beaten by starvation or force into accepting
terms, distasteful to them, could fail to renew
the struggle at the earliest possible moment ;
and we can only conclude that the International
Financial Groups who precipitate these
struggles do not really care how frequent they
are — the cost of them is simply passed on to
the public in prices, and the real authors of
them not merely go completely untouched
by the repeated tragedies, but from villas on
the Eiviera or elsewhere " glut " their love
of power by contemplating the writhings of
the world they have enslaved.
Dr Leighton Parkes, Eector of St Bar-
tholomew's Episcopal Church, New York,
stirred up a hornets' nest by stating that " the
Koman Catholic Hierarchy in this country
[United States] desires nothing more than to
bring about a war with England, not only on
account of the ancient grudge, but because
England is the great Protestant country of
Europe as we are in the Western Hemisphere."
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DISTRIBUTION OF PRODUCTION
We think Dr Leighton Parkes is to be con-
gratulated on his plain speaking. It is quite
certain that the fundamental difierence be-
tween political Roman Catholicism and political
Protestantism (all religions are the basis of
political systems) is that the first is essentially
authoritarian and the second is individual-
istic. There are thousands of English Roman
Catholics who are such because they are
attracted by the beauty and dignity of its
ritual and the artistic impact of its code of life.
But the simple fact remains that when stripped
to its essentials the Roman claim is a claim
for the surrender of individual judgment and,
in any important crisis, of individual action.
That is one reason why Roman Catholics are
so successful in the army, and it is the great
reason why the Hierarchy of Rome, as apart
from the many delightful personages to be
found in it, is a danger to peace, freedom and
development, wherever it is entrenched.
165
CHAPTER XIV
" THE MOVING FINGER WRITES . . ."
It is now nearly three years since the first
publication of the credit theory which has
become, it is hoped, more familiar than seemed
likely at that time. When that theory first
saw the light of publicity the world, panting
and enfeebled from the first world war, was
threatened with social upheaval and torn with
conflicting idealisms on the one hand, and a
prey to the megalomaniacs of industry and
finance on the other. " All power to the
Soldiers and Workers Councils ! " yelled the
Left. " Increased production," murmured
Lord Inchcape, as he passed the plans for a
few hundred new branch banks.
Well, they have all had their way. The
greatest undivided unit of the world's surface,
a national territory which could accommodate
comfortably the United States and the whole
of non-Russian Europe within its boundaries
and still have vast expanses unoccupied; an
166
II
DISTRIBUTION OF PRODUCTION
area which is probably far richer in potential
resources than any other under one control,
has been nominally ruled for more than four
years by the first Workers Republic. In
that short space of time millions of the class
in whose interests it is alleged that the Soviet
Republic was created have been reduced to a
state of famine and misery far in excess of
anything experienced under the corrupt and
inefficient regime of the Tsar. The control of
the individual worker over his life and destiny,
so far from having increased, has become a
mere mockery, and the only tolerable portions
of Russia appear to be those in which the writ
of the centralised despotism of Moscow does
not run. A new era is opening; enter Herr
Stinnes and Mr Hoover.
In Great Britain and America the working
out of the dominant policy has been equally
instructive if only less immediately disastrous.
Following on the gigantic expansion of plant
which took place during the war, the year
1919 and the early half of 1920 saw still more
factory and real capital production, accom-
panied, for reasons explained many times in
167
THE CONTROL AND
these pages, by a continuous rise in prices.
Lord Inchcape has got his branch banks.
Homes for heroes are still under strength.
In May 1920 the financial powers considered
that the process had gone far enough and
withheld further facilities, and in a period of
less than eighteen months, of the many
ambitious enterprises floated at the expense
of the public in the immediate post-war period,
probably 95 per cent, have come into the
complete control of the Joint Stock Banks,
and not one of the remainder can carry on for
a year except with their permission. The
banker, busily engaged just now in sorting out
from his catch those specimens worth, from a
banker's point of view, preservation, condoles
with the manufacturer and trader, who doesn't
quite know what has hit him. " Ah, my dear
fellow," you can hear him say, " if only those
damned lazy scoundrels of yours had worked
harder and consumed less ! Wait a bit : sell
your car and live quietly for a few months and
we may be able to put you back into your own
works as manager, and then you can teach the
blighters what's what. In fact we'll take care
168
DISTRIBUTION OF PRODUCTION
that you do, if you want to hold your job.
Good-morning, my dear fellow."
(It will be noticed that while prices of retail
or ultimate commodities rose during the period
of credit inflation almost directly in propor-
tion to that inflation, the stringency has failed
signally to produce a corresponding fall : a
result which confirms the credit theory that
while prices can rise to any height under the
stress of financial or effective demand, they
cannot fall below costs, which include all credit
issues, without bankruptcy of any entrepreneur
who has not access to the general credit.)
Meanwhile the Labour Movement in this
country and in America has met its Waterloo.
Headed very vigorously and firmly away from
one or two timid approaches to a consumers'
policy, such as the demand for a trifiing reduc-
tion in the price of coal, and bound hand and
foot to an economic theory identical with the
capitalism it professes to attack, it is now
firmly established in the public estimation
as an anti-public interest. Endowed by the
circumstances of the war with such an op-
portunity as no one political party ever had
169
THE CONTROL AND
before or probably ever will have again, the
Labour Party both in Parliament and out of
it has proved to demonstration that because
its structure is fundamentally identical with
that of other political parties it moves more
or less slowly along similar lines to those of
its competitors, depending as to pace on the
qualities of its personnel. They can change
the pace but they cannot change the direction.
That direction is merely to centralise or focus
whatever power is resident in the interest
for which the party stands, and it is patent
that labour, simply as a component of the
productive process, is fundamentally a dying
interest.
Had the miners' strike, or lock-out, occurred
twenty-five years ago it would have paralysed
this country and convulsed the world. How
much of a ripple did it produce in 1921 ? If
economic power precedes political power, as
it does, how much influence will a purely
Labour Party exercise in politics ?
The factor most destructive of progress to
the Labour Party and most useful to the forces
opposed to its legitimate aspirations is its
170
DISTRIBUTION OF PRODUCTION
incorrigible abstraction from reality — an ab-
straction which is quite probably the result,
amongst other things, of generations of
" religious " instruction specifically directed
to the preaching of " other worldliness," and
to that extent also an instance of the direction
of Labour thought by financial influences.
It is rampant in every sphere of Labour
political action, from the lionising of Mr
Greorge Lansbury, an honest citizen who would
like to apply his conception of the Sermon on
the Mount to the game of cut-throat poker,
to the instantaneous success of Mr Tawney's
title for his book. The Sickness of an Acquisitive
Society. I have not read that book, which is
doubtless excellent, but its title suggests that
the average man ought to work with the
specific object of not getting what he works
for — goods ; a precisely parallel line of
argument to that of the orthodox capitalist
who insists that the major object of industry
is to send goods away from those who
made them, by export, or otherwise, so that
" employment " may never fail.
Put shortly, the psychology of the Labour
171
THE CONTROL AND
Party is a psychology of failure. To be poor
is to be virtuous ; to be well off is to be wicked ;
and the objective of all action is to replace
the wicked by the virtuous. As a result, the
official Labour Party is almost irrevocably
committed to a policy of attack, of levelling
down, and is bound to be opposed, sooner or
later, by everyone with any conception of the
possibility of levelling up, as well as by those
who have anything to lose.
It is no pleasant thing to have to criticise
that party. There was a period when organised
Labour appeared to be the hope of the world,
but that hope is now very dim ; not only from
the causes just outlined, but because the power
given to it by the circumstances of war has
been dissipated. Not a single proposition of
the capitalist system has been even challenged
by it ; every strike has been a fight for position
in the system, a claim either that the office
boy ought to be General Manager, or at any
rate ought to control the General Manager,
combined with lurid threats to the firm's
customers that, in the happy days to come,
Labour would " larn " them what it was like
172
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DISTRIBUTION OF PRODUCTION
to be an office boy. A very alluring pro-
gramme. R.I.P.
While the Labour Party has for all practical
purposes devoted its attention to a mechanical
and unreasoning claim to power on the grounds
of virtue, the financiers have not been so
immobile. So long as it was possible to keep
the subject of credit away from public dis-
cussion it was done, and done well. But
merely negative opposition, in the nature of
things, being bound to fail, a positive line of
action has been elaborated and is now well
under way — the exploitation of public credit
for export purposes. Apart from the Ter
Meulen and Mountain schemes, the Govern-
ment {i.e. Zaharoff-Sassoon) proposals for
dealing with " unemployment " are based
fundamentally on an export credit scheme
buttressed by relief works at home, the latter
to be financed out of taxation.
Now it is our contention that the use and
control of credit is absolutely the vital issue
of the present era. It is a force and can be
used like other forces to destroy or to build,
and it is quite possible that in this Government
173
THE CONTROL AND
proposal we are faced with a real crisis in the
history of civilisation. If it is put into force,
we are committed to a line of action diametric-
ally opposed to that urged in the pages of this
book, and it is therefore vital that it should
be understood.
The proposal involves the pledging of public
credit to the extent of (at first), say, £26,000,000.
It should be particularly noted that Mr Lloyd
George explicitly says : " It is not consumable
goods of which the world stands in the most
urgent need. What it stands mostly in need
of is equipment to start its trade — machinery,
transport ; and short credits are of no use when
you are dealing with heavy goods of that kind.
We have come to the conclusion ... it is
desirable that we should extend credit for
five or even six years (Hear, hear!)" — Times
report, 20th October.
That is to say, although the productive
capacity of the industrial nations was so
enormous that it overtook the wastage of a
four and a half years' war in eighteen months,
so that two and a half millions are unemployed
in this country, and probably six millions in
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DISTRIBUTION OF PRODUCTION
America, the energies of the nation are to be
employed, not in obtaining the maximum
benefit from its existing plant, but in pro-
ducing still more plant to be exported in
competition with countries similarly situated.
This £25,000,000, then, will be paid out in
this country as wages, salaries and dividends,
entirely unrepresented by any goods for which
the general public has any demand whatever.
The money so paid out, therefore, represents
pure inflation, and, being unaccompanied by
any method of dealing with prices, means the
inevitable result of pure inflation — a rise in
prices. In other words, the goods exported
under these conditions are paid for by the
general public through the agency of a general
rise in prices, but not delivered to them, but
the credits, if ever repaid, are repaid not to
the general public, but to the banks who will
finance these credits. And as at the same
time these exports will be in fierce competi-
tion with similar goods from, say, America,
preparations for the coming war will naturally
be accelerated.
175
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Great Britain
HB Douglas, Clifford Hugh
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